Find the total salary earned by the 20 employees (i.e. the total payroll for Company X) by multiplying the number of employees that receive salary, and then sum the results. Then devide the total payroll by the number of employees to calculate the average salary:
5*$20,000 + 4*$22,000 + 8*$25,000 + 3*$30,000 = $100,000 + $88,000 + $200,000 + $90,000 = $478,000.
Divide the result by the total number of employees to get the average wage (wav): = $23,900.
Trying to approximate the average salary may give inaccurate results and lead to a wrong answer, especially if the answer choices are very close.
Arithmetic mean (average):
For example, xi is salary of i th employee and n - the total number of employees.
Weighted mean (average):
For example, there are n groups of employees and all employees in the same group have the same salary. Then xi is salary of each employee and wi is the number of employees in i th group.