A company owns six buildings with different lease prices per square foot. Each unit has different total square footage. You have been asked to compute the weighted average price per square foot. Ensure you answer is accurate to .1 dollars.

Building 1: $85/sq ft, 125,000 sq ft
Building 2: $85/sq ft, 37,500 sq ft
Building 3: $80/sq ft, 77,500 sq ft
Building 4: $45/sq ft, 35,000 sq ft
Building 5: $55/sq ft, 60,000 sq ft
Building 6: $120/sq ft, 130,000 sq ft

Question

A company owns six buildings with different lease prices per square foot. Each unit has different total square footage. You have been asked to compute the weighted average price per square foot. Ensure you answer is accurate to .1 dollars.

Building 1: $85/sq ft, 125,000 sq ft
Building 2: $85/sq ft, 37,500 sq ft
Building 3: $80/sq ft, 77,500 sq ft
Building 4: $45/sq ft, 35,000 sq ft
Building 5: $55/sq ft, 60,000 sq ft
Building 6: $120/sq ft, 130,000 sq ft

BlackTom AI · Accepted Answer

Weighted average price per square foot = (sum of (price per sq ft × square footage)) ÷ (total square footage).

1) Relevant concepts
- A weighted average is used when values (prices) apply to different quantities (square footage). Each building’s price should be weighted by its square footage because larger buildings contribute more to the overall average price per square foot.

2) Step-by-step calculation
Compute price × area for each building:
- Building 1: 85 × 125,000 = 10,625,000
- Building 2: 85 × 37,500 = 3,187,500
- Building 3: 80 × 77,500 = 6,200,000
- Building 4: 45 × 35,000 = 1,575,000
- Building 5: 55 × 60,000 = 3,300,000
- Building 6: 120 × 130,000 = 15,600,000

3) Intermediate sums
- Sum of dollar·square-feet (numerator): 10,625,000 + 3,187,500 + 6,200,000 + 1,575,000 + 3,300,000 + 15,600,000 = 40,487,500
- Total square footage (denominator): 125,000 + 37,500 + 77,500 + 35,000 + 60,000 + 130,000 = 465,000

4) Final division and rounding
- Weighted average = 40,487,500 ÷ 465,000 = 87.06989247...
- Rounded to the nearest tenth of a dollar = 87.1

5) Why this is correct and why other approaches are wrong
- This method correctly weights each building’s unit price by how much area it represents; larger buildings influence the overall per-square-foot average more. A simple (unweighted) average of the six prices would be (85+85+80+45+55+120)/6 = 85.0, which ignores differing square footage and would misrepresent the portfolio’s true average price per square foot.

6) Conclusion
The computed weighted average price per square foot, rounded to one decimal place, is 87.1, which matches the provided correct answer.

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