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I have a list of products with quantity shipped and total net sales for a period of two years. What is the correct way to calculate the average price change for all products?

╔══════╦════════╦══════════╦════════╦════════╦══════════╦════════╦══════╦══════╗ ║ Item ║ QTY_Y1 ║ NS_Y1 ║ P_Y1 ║ QTY_Y2 ║ NS_Y2 ║ P_Y2 ║ %Chg ║ WT ║ ╠══════╬════════╬══════════╬════════╬════════╬══════════╬════════╬══════╬══════╣ ║ A ║ 978 ║ $28,521 ║ $29.16 ║ 558 ║ $17,145 ║ $30.73 ║ 5% ║ 52.44║ ║ B ║ 28 ║ $866 ║ $30.94 ║ 8 ║ $248 ║ $30.94 ║ 0% ║ 0.00║ ║ C ║ 8 ║ $115 ║ $14.37 ║ 8 ║ $115 ║ $14.37 ║ 0% ║ 0.00║ ║ D ║ 320 ║ $4,667 ║ $14.58 ║ 136 ║ $1,977 ║ $14.54 ║ 0% ║ -0.98║ ║ E ║ 6860 ║ $543,312 ║ $79.20 ║ 3600 ║ $285,120 ║ $79.20 ║ 0% ║ 0.00║ ║ F ║ 1 ║ $71 ║ $70.56 ║ 2 ║ $147 ║ $73.44 ║ 4% ║ 0.04║ ║ G ║ 1920 ║ $190,080 ║ $99.00 ║ 420 ║ $41,580 ║ $99.00 ║ 0% ║ 0.00║ ║ H ║ 4 ║ $138 ║ $34.40 ║ 2 ║ $68 ║ $34.20 ║ - 1% ║ -0.02║ ╚══════╩════════╩══════════╩════════╩════════╩══════════╩════════╩══════╩══════╝ There are multiple ways to do this, but what's correct?

Option 1:

$46.53 = Average price year 1

$47.05 = Average price year 2

(47.05 - 46.53)/46.53 = 1.13%

1% difference in prices from year 1 to year 2

Option 2:

$767,769 = Sum of net sales from year 1

10,119 = Quantity from year 1

$767,769/10,119 = $75.87

$346,400 = Sum of net sales from year 2

4,734 = Quantity from year 2

$346,400/4,734 = $73.17

(73.17-75.87)/75.87 = -3.56%

-3.56% difference in prices from year 1 to year 2

Option 3: 1. Calculate the percent change for each product from one year to the next. (Eg. Product A - (30.73-29.16)/(29.16) = 5%)

  1. Multiply % change by Year 1 Quantity (Eg. Product A - 978 * 5% = 52)

  2. Add up new weighted values (52.44 + 0 + 0 + -.98 + 0 + .04 + 0 + -.02) = 51.48

  3. Divide by sum of quantity from year 1 (51.48/10,119) = .005

.51% difference in prices from year 1 to year 2

  • 0
    Why the down vote? This is a legitimate question? – 2017-01-03
  • 0
    Option 1 is correct as in option 2 answer is -ve so it means price decreases that is not the case. – 2017-01-04
  • 0
    About option 3 I m not sure because unable to understand. But about option 1 I am sure. – 2017-01-04
  • 0
    Does it matter that option 1 doesn't take quantities sold into effect? – 2017-01-04
  • 0
    I think 1st and 3rd method yields same result. But not sure. And once again I am sure about 1st method. – 2017-01-04

1 Answers 1

0

Hint -

First find one item price for each item for first year.

Then add them and divide by number of items.

Second thing find one item price for each item for second year.

Then add them and divide by number of items.

Difference between these two averages is your answer.

  • 0
    Thanks for your feedback, but I don't think it's that simple given the different quantities involved. I spelled out three solutions above and they all yield different answers.What's the correct way to approach this? – 2017-01-03