What does the term "weighted average" refer to?

The term "weighted average" refers to a calculation that considers the relative importance of different values rather than treating all values equally. In this context, it describes a method of finding the average where each unit's value is multiplied by the number of units associated with that value before averaging, allowing for a more accurate representation of the overall cost.

The correct description, which encompasses the essence of weighted average, involves summing the products of the number of units and their respective values and dividing by the total number of units. This calculation provides an accurate average that reflects the varying contributions of different items based on how many units there are of each that inform the average.

This definition is contrary to the other options, which do not capture the weighted aspect correctly. For instance, while one option may mention unit costs multiplied by the number of units, it lacks the key element of dividing by total units to find an average. Another option inaccurately addresses sales costs without relating it specifically to the concept of a weighted average. Yet another option refers to average costs based solely on recent purchases, which can be misleading compared to what a weighted average encompasses over time and various quantities.