Practice · Weighted Averages
Weighted average questions
Weighted average questions test your ability to combine values from different segments proportionally. They appear in nearly every profitability case where a company has multiple product lines, regions, or customer segments with different unit economics.
Why interviewers test this
Interviewers use weighted averages to see if you can resist the trap of simple averaging. A company with two segments at 30% and 10% margin doesn’t have a 20% blended margin unless both segments are equal size. Getting this wrong cascades through the entire case.
Worked examples
Segment A is 60% of revenue at 20% margin. Segment B is 40% at 10% margin. What is the blended margin?
Blended = (60% × 20%) + (40% × 10%) = 12% + 4% = 16%. Not 15% — the larger segment pulls the average toward its value.
Office A: 200 staff at €70K avg salary. Office B: 100 staff at €50K. Weighted average salary?
(200 × 70K + 100 × 50K) / 300 = (14M + 5M) / 300 = €63.3K. Not €60K — the larger office has more weight.
Strategies
Blended value = Σ(weight × value) / Σ(weights). The weights can be revenue share, headcount, volume, etc.
Anchor-and-adjust shortcut: start at the largest segment’s value, then adjust toward the smaller segment by its proportional pull.
Watch for the trap: ‘average of the margins’ is almost never the right answer unless segments are equal size.
For 3+ segments, calculate each contribution separately and sum. Don’t try to do it in one step.
Difficulty 2-4. Easy: two segments with clean percentages. Hard: three or more segments with headcount-weighted or revenue-weighted calculations.
Practice weighted averages under pressure
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