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Excel Tutorial 10 Performing What-If Analyses COMPREHENSIVE Objectives XP • Explore the principles of cost-volume-profit relationships • Perform a basic what-if analysis • Use Goal Seek to calculate a solution • Create a one-variable data table • Create a two-variable data table • Create and apply different Excel scenarios New Perspectives on Microsoft Office Excel 2007 2 Objectives • • • • • • XP Generate a scenario summary report Generate a scenario PivotTable report Explore the principles of price elasticity Run Solver to calculate optimal solutions Create and apply constraints to a Solver model Save and load a Solver model New Perspectives on Microsoft Office Excel 2007 3 Understanding Cost-Volume-Profit Relationships XP • Cost-volume-profit (CVP) analysis expresses the relationship between a company’s expenses, its volume of business, and the resulting profit or net income • Variable expenses change in proportion to the amount of business a company does • A fixed expense is an expense that must be paid regardless of sales volume • A variable expense is part variable and part fixed • The point where revenue equals expenses is called the break-even point – Break-even analysis New Perspectives on Microsoft Office Excel 2007 4 Understanding Cost-Volume-Profit Relationships New Perspectives on Microsoft Office Excel 2007 XP 5 Working with What-If Analysis and Goal Seek XP To perform what-if analysis: – Change the value of a worksheet cell (the input cell) – Observe its impact on one or more calculated cells (the result cells) To perform Goal Seek: – In the Data Tools group on the Data tab, click the What-If Analysis button, and then click Goal Seek – In the Set cell box, select the result cell, and then, in the To value box, specify its value (goal) – In the By changing cell box, specify the input cell – Click the OK button. The value of the input cell changes to set the value of the result cell New Perspectives on Microsoft Office Excel 2007 6 Working with What-If Analysis and Goal Seek New Perspectives on Microsoft Office Excel 2007 XP 7 Working with What-If Analysis and Goal Seek New Perspectives on Microsoft Office Excel 2007 XP 8 Working with One-Variable Data Tables XP • A data table organizes the results of several what-if analyses within a single table • Insert a formula that references the input cell in the upper-left cell of the table • Insert input values in either the first row or first column of the table • For input values in the first row, insert formulas referencing result cells in the table’s first column; for input values in the first column, insert formulas referencing result cells in the table’s first row New Perspectives on Microsoft Office Excel 2007 9 Working with One-Variable Data Tables XP • Select the table (excluding any row or column headings). In the Data Tools group on the Data tab, click the What-If Analysis button, and then click Data Table • If the input values are in the first row, enter the cell reference to the input cell in the Row input cell box; if the input values are in the first column, enter the cell reference to the input cell in the Column input cell box • Click the OK button New Perspectives on Microsoft Office Excel 2007 10 Working with One-Variable Data Tables New Perspectives on Microsoft Office Excel 2007 XP 11 Working with Two-Variable Data Tables XP • A two-variable data table uses two input cells, but unlike a one variable data table, only the value of a single result cell can be displayed • Insert a formula that references the result cell in the upper-left cell of the table • Insert input values in the first row and first column of the table • Select the table (excluding any row or column headings) • In the Data Tools group on the Data tab, click the WhatIf Analysis button, and then click Data Table New Perspectives on Microsoft Office Excel 2007 12 Working with Two-Variable Data Tables XP • Enter the cell reference corresponding to the input values in the first row in the Row input cell box; enter the cell reference to the input values in the first column in the Column input cell box • Click the OK button New Perspectives on Microsoft Office Excel 2007 13 Working with Two-Variable Data Tables New Perspectives on Microsoft Office Excel 2007 XP 14 Using Scenario Manager XP • Scenario Manager enables you to create as many scenarios as you want, easily switching between the different scenarios to display the results of several what-if analyses • Enter the data values in the worksheet for the scenario • In the Data Tools group on the Data tab, click the What-If Analysis button, and then click Scenario Manager New Perspectives on Microsoft Office Excel 2007 15 Using Scenario Manager XP • Click the Add button in the Scenario Manager dialog box • In the Scenario name box, type a name for the scenario • In the Changing cells box, specify the input or changing cells • Click the OK button • In the Scenario Values dialog box, specify values for each of the input cells, clicking the Add button after each • Click the OK button New Perspectives on Microsoft Office Excel 2007 16 Using Scenario Manager New Perspectives on Microsoft Office Excel 2007 XP 17 Creating a Scenario Summary Report XP • A scenario summary report lists the values for the changing cells and result cells under each scenario • In the Data Tools group on the Data tab, click the WhatIf Analysis button, and then click Scenario Manager • Click the Summary button • Click the Scenario summary option button to create a scenario summary report (or click the Scenario PivotTable report option to create a PivotTable describing the scenarios) • Select the results cells to display in the report • Click the OK button New Perspectives on Microsoft Office Excel 2007 18 Creating a Scenario Summary Report New Perspectives on Microsoft Office Excel 2007 XP 19 Creating a Scenario PivotTable Report XP • A Scenario PivotTable report displays the results from each scenario as a pivot field in a PivotTable • In the Data Tools group on the Data tab, click the What-If Analysis button, and then click Scenario Manager • Click the Summary button, and then click the Scenario PivotTable report option button • Click the OK button New Perspectives on Microsoft Office Excel 2007 20 Creating a Scenario PivotTable Report New Perspectives on Microsoft Office Excel 2007 XP 21 Understanding Price Elasticity of Demand New Perspectives on Microsoft Office Excel 2007 XP 22 Understanding Price Elasticity of Demand XP • The effect that price has on demand is called the price elasticity of demand – Relatively inelastic – Perfectly inelastic – Relatively elastic – Perfectly elastic – Unit elastic New Perspectives on Microsoft Office Excel 2007 23 Finding an Optimal Solution Using Solver XP • Solver is a program that searches for the optimal solution of a problem involving several variables • Check whether Solver is already installed and activated. If it is, Solver will appear in Analysis group on the Data tab • Click the Office Button, and then click the Excel Options button • Click Add-Ins in the left pane, and then click the arrow next to the Manage box and click Excel Add-ins • Click the Go button to open the Add-Ins dialog box • Click the Solver Add-in check box, and then click the OK button. Follow the remaining prompts to install Solver, if it is not already installed New Perspectives on Microsoft Office Excel 2007 24 Setting Solver Parameters XP • In the Analysis group on the Data tab, click the Solver button • In the Set Target Cell box, specify the target cell • Click the Max, Min, or Value of option buttons to maximize, minimize, or set the target cell to a specified value • In the By Changing Cells input box, specify the changing cells New Perspectives on Microsoft Office Excel 2007 25 Setting Constraints on the Solver Solution XP • In the Solver Parameters dialog box, click the Add button • Enter the cell reference of the cell or cells containing the constraint • Specify the nature of the constraint (<=, =, >=, int, or bin) • Enter the constraint value in the Constraint box • Click the OK button to add the constraint and return to the Solver dialog box • Repeat for each constraint you want to add New Perspectives on Microsoft Office Excel 2007 26 Setting Constraints on the Solver Solution New Perspectives on Microsoft Office Excel 2007 XP 27 Saving and Loading a Solver Model XP • To save a Solver model: – Open the Solver dialog box – Click the Options button and then click the Save Model button – Select the range to contain the parameters of the Solver model, and then click the OK button • To load a Solver model: – Open the Solver dialog box – Click the Options button and then click the Load Model button – Select the range within the current worksheet containing the Solver parameters, and then click the OK button New Perspectives on Microsoft Office Excel 2007 28 Saving and Loading a Solver Model New Perspectives on Microsoft Office Excel 2007 XP 29 Saving and Loading a Solver Model New Perspectives on Microsoft Office Excel 2007 XP 30