Excel Tutorial 10 Performing What-If Analyses

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Excel Tutorial 10 Performing What-If Analyses. Objectives. 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

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### Excel Tutorial 10Performing What-If Analyses

Objectives
• 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

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Objectives
• 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

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Understanding Cost-Volume-Profit Relationships
• 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

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Understanding Cost-Volume-Profit Relationships

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Working with What-If Analysis and Goal Seek

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

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Working with What-If Analysis and Goal Seek

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Working with What-If Analysis and Goal Seek

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Working with One-Variable Data Tables
• 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

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Working with One-Variable Data Tables
• 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

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Working with One-Variable Data Tables

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Working with Two-Variable Data Tables
• 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 What-If Analysis button, and then click Data Table

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Working with Two-Variable Data Tables
• 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

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Working with Two-Variable Data Tables

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Using Scenario Manager
• 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

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Using Scenario Manager
• 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

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Using Scenario Manager

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Creating a Scenario Summary Report
• 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 What-If 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

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Creating a Scenario Summary Report

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Creating a Scenario PivotTable Report
• A Scenario PivotTable report displays the results from each scenario as a pivotfield 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

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Creating a Scenario PivotTable Report

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Understanding Price Elasticity of Demand

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Understanding Price Elasticity of Demand
• The effect that price has on demand is called the price elasticity of demand
• Relatively inelastic
• Perfectly inelastic
• Relatively elastic
• Perfectly elastic
• Unit elastic

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Finding an Optimal Solution Using Solver
• 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

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Setting Solver Parameters
• 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

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Setting Constraints on the Solver Solution
• 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

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Setting Constraints on the Solver Solution

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• 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

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