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Tutorial 10: Performing What-IF Analyses

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Tutorial 10: Performing What-IF Analyses

  1. 1. Tutorial 10: Performing What-If AnalysesMicrosoft Office Excel 2010 ® ®
  2. 2. Visual Overview XPNew Perspectives on Microsoft Excel 2010 2
  3. 3. Data Tables and What-If Analysis XPNew Perspectives on Microsoft Excel 2010 3
  4. 4. Understanding Cost-Volume-Profit XP Relationships • Cost-volume-profit (CVP) analysis – Studies the relationship between expenses, sales volume, and profitability – Helps predict the effect of cutting overhead or raising prices on a company’s net income – Sometimes called break-even analysisNew Perspectives on Microsoft Excel 2010 4
  5. 5. Comparing Expenses and Revenue XP • Types of expenses – Variable expenses change in proportion to the amount of business a company does – Fixed expense must be paid regardless of sales volume – Mixed expense is part variable and part fixedNew Perspectives on Microsoft Excel 2010 5
  6. 6. Determining the Break-Even Point XP • Break-even point: revenue equals expenses • A CVP chart shows the relationship between expenses and revenueNew Perspectives on Microsoft Excel 2010 6
  7. 7. Performing a What-If Analysis with XP Goal Seek • What-if analysis lets you explore the impact of changing different values in a worksheet • Goal Seek automates trial-and-error process – Allows you to specify a value for a calculated item – Excel returns input value needed to reach the goal – Goal Seek dialog boxNew Perspectives on Microsoft Excel 2010 7
  8. 8. Performing a What-If Analysis with XP Goal SeekNew Perspectives on Microsoft Excel 2010 8
  9. 9. Working with Data Tables XP • Display results from several what-if analyses • One-variable data table – Specify one input cell and any number of result cells – Useful in business to explore how changing a single input cell can impact several result cellsNew Perspectives on Microsoft Excel 2010 9
  10. 10. Charting a One-Variable Data Table XP • Gives a better picture of relationship between sales volume, revenue, and total expensesNew Perspectives on Microsoft Excel 2010 10
  11. 11. Creating a Two-Variable Data Table XP • Analyzes a variety of combinations simultaneously • Uses two input cells, but displays only a single result value • Must identify the row input cell and the column input cellNew Perspectives on Microsoft Excel 2010 11
  12. 12. Creating a Two-Variable Data Table XPNew Perspectives on Microsoft Excel 2010 12
  13. 13. Charting a Two-Variable Data Table XPNew Perspectives on Microsoft Excel 2010 13
  14. 14. Visual Overview XPNew Perspectives on Microsoft Excel 2010 14
  15. 15. What-If Scenarios XPNew Perspectives on Microsoft Excel 2010 15
  16. 16. Using the Scenario Manager XP • Create scenarios to perform a what-if analysis with more than two input cells • Define names for all input and result cells that you intend to use in the analysis – Defined names automatically appear in reports generated by the Scenario Manager – Using defined names makes it easier to work with scenarios and understand the scenario reportsNew Perspectives on Microsoft Excel 2010 16
  17. 17. Using the Scenario Manager XP • Use the Scenario Manager to define scenarios – Each scenario includes a scenario name, input cells, and values for each input cell – Number of scenarios is limited only by computer’s memory • Input cells are referred to as changing cells – Contain values that are changed under the scenario – Can be located anywhere in the worksheetNew Perspectives on Microsoft Excel 2010 17
  18. 18. Using the Scenario Manager XP • Edit Scenario dialog boxNew Perspectives on Microsoft Excel 2010 18
  19. 19. Using the Scenario Manager XP • Scenario Values dialog boxNew Perspectives on Microsoft Excel 2010 19
  20. 20. Using the Scenario Manager XP • View the effect of each scenario by selecting it in the Scenario Manager dialog boxNew Perspectives on Microsoft Excel 2010 20
  21. 21. Using the Scenario Manager XP • Editing a Scenario – Edit the assumptions to view other possibilities – Worksheet calculations are automatically updated to reflect the new scenarioNew Perspectives on Microsoft Excel 2010 21
  22. 22. Creating a Scenario Summary Report XP • Displays the values of the input cells and result cells under each scenario • Tabular layout makes it simpler to compare results of each scenario • Automatic formatting makes it useful for reports and meetingsNew Perspectives on Microsoft Excel 2010 22
  23. 23. Scenario Summary Report XPNew Perspectives on Microsoft Excel 2010 23
  24. 24. Creating a Scenario PivotTable Report XP • Displays results from each scenario as a pivot field in a PivotTableNew Perspectives on Microsoft Excel 2010 24
  25. 25. Creating a Scenario PivotTable Report XP • Results for the table can be displayed in a PivotChartNew Perspectives on Microsoft Excel 2010 25
  26. 26. Visual Overview XPNew Perspectives on Microsoft Excel 2010 26
  27. 27. Using Solver XPNew Perspectives on Microsoft Excel 2010 27
  28. 28. Understanding Price Elasticity of XP Demand • Point of maximum revenue occurs somewhere between lowest and highest sales price • Demand and revenue as functions of priceNew Perspectives on Microsoft Excel 2010 28
  29. 29. Understanding Price Elasticity of XP Demand • Elasticity – Effect of one financial variable upon another • Price elasticity of demand – Effect that price has on demand • Elasticity measures are always expressed as positive valuesNew Perspectives on Microsoft Excel 2010 29
  30. 30. Price Elasticity of Demand XP • Relatively inelastic • Perfectly elastic – Price elasticity of demand is – Large elasticity values less than 1 – Any change in price causes a – Large changes in price cause huge change in demand small changes in demand • Unit elastic • Perfectly inelastic – Elasticity equals 1.0 – Elasticity equals 0 – Any change in price is met by – Changes in price have no an equal and opposite change impact on demand in demand • Relatively elastic – Price elasticity of demand is greater than 1 – Demand is very responsive to changes in priceNew Perspectives on Microsoft Excel 2010 30
  31. 31. Maximizing Net Income Through Trial XP and Error • Using the trial and error process can be very time-consuming if you have a large range of possible valuesNew Perspectives on Microsoft Excel 2010 31
  32. 32. Finding an Optimal Solution Using XP Solver • Solver searches for the optimal solution to a problem involving several variables • Arrives at optimal solutions through an iterative procedure • Because it is an add-in, Solver might need to be activatedNew Perspectives on Microsoft Excel 2010 32
  33. 33. Setting Up Solver to Find a Solution XP • Specify three Solver parameters – Objective cell – Variable (or changing) cells – ConstraintsNew Perspectives on Microsoft Excel 2010 33
  34. 34. Setting Up Solver Constraints XP • Constraints confine the solution within a reasonable set of defined limits • Constraints supported by Solver – <=, >=, and = – integer or int – binary or bin – dif or AllDifferentNew Perspectives on Microsoft Excel 2010 34
  35. 35. Setting Up Solver Constraints XP • Add Constraint dialog boxNew Perspectives on Microsoft Excel 2010 35
  36. 36. Setting Up Solver Constraints XP • Completed Solver Parameters dialog boxNew Perspectives on Microsoft Excel 2010 36
  37. 37. Creating a Solver Answer Report XP • Solver can create three different reports – Answer report (the most useful) – Sensitivity report – Limits reportNew Perspectives on Microsoft Excel 2010 37
  38. 38. Sections of a Solver Answer Report XP • Titles • Information about the objective cell: location, cell label, and cell’s original value and final values • Information about the changing cells (variable cells): location, column and row label, original value, and final value of each cell • Information about the constraints: not binding and binding, and slackNew Perspectives on Microsoft Excel 2010 38
  39. 39. Creating a Solver Answer Report XPNew Perspectives on Microsoft Excel 2010 39
  40. 40. Choosing a What-If Analysis Tool XP Data tables • To perform several what-if analyses involving one or two input cells and to display analysis in a tabular format • Easily displayed as charts Create a • For what-if analyses involving more than two input cells scenario • Scenario summary tables and scenario PivotTables can be used to obtain a quick snapshot of several possible outcomes • Scenarios can be merged and shared among several workbooks Solver • To maximize or minimize a value (provide a single solution or “best outcome”) • To set a calculated cell to a specific value Goal Seek • If you don’t need to specify any constraints on your solutionNew Perspectives on Microsoft Excel 2010 40
  41. 41. Saving and Loading Solver ModelsXP • Save parameters in cells in the worksheet – Reload the parameters from the worksheet cells without having to reformulate the problem – Create dozens of models that you can load and apply to your analysis as new data is entered • Load/Save Model dialog boxNew Perspectives on Microsoft Excel 2010 41
  42. 42. Saving and Loading Solver ModelsXP • Saved Solver modelNew Perspectives on Microsoft Excel 2010 42

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