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Lab 1: Learning Spreadsheet Simulation

All lab reports are due at the end of class with grading starting at 100% and decreasing 10% each additional late day. Lab 1 involves creating a spreadsheet sales simulation model accounting for risk and uncertainty in next year's sales forecasts for 3 customers using different probability distributions: normal, triangular, and binomial. The completed simulation table with 500 recalculations is analyzed to provide sample statistics and percentile estimates for sales projections.

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Abdu Abdoulaye
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40 views3 pages

Lab 1: Learning Spreadsheet Simulation

All lab reports are due at the end of class with grading starting at 100% and decreasing 10% each additional late day. Lab 1 involves creating a spreadsheet sales simulation model accounting for risk and uncertainty in next year's sales forecasts for 3 customers using different probability distributions: normal, triangular, and binomial. The completed simulation table with 500 recalculations is analyzed to provide sample statistics and percentile estimates for sales projections.

Uploaded by

Abdu Abdoulaye
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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All the lab reports are due at the end of the class.

The grading policy for labs:


Labs turned in when due: grading starts at 100%
Labs turned in 1 day late: grading starts at 90%
Labs turned in 2 days late: grading starts at 80%

Lab 1: Learning Spreadsheet Simulation


In this lab you will create and run a Sales spreadsheet model. Please take your time on this lab;
even though it is easy, it is your one guided opportunity to learn how to use the SIMTOOLS
software.
Begin by building the following spreadsheet:

In C8, enter the formula =SUM(C5:C7), in D8 enter =SUM(D5:D7), etc.


We want to add risk analysis to next years sales forecasts. We will add uncertainty to the sales
for each of 3 customers, depending on what we know. Read all of this before you start entering
anything else into your spreadsheet.

We believe that sales to Big Guy may increase by as much as 8%, are most likely to
increase by 2%, but could go down as much as 3%. This years sales were $25.8 million.
To represent this situation, multiply the previous years sales by
1+TRIANINV(RAND(),-.03,.02,.08) to get the next years sales.
Sales to Little Guy are expected to remain the same as last year, but with an average
deviation of 15% either way. This years sales were $5.2 million. To represent this
situation, model next years sales using the distribution
NORMINV(RAND(),previous,0.15*previous), where previous is the cell
address of previous years sales.
Zero-One Guy either places an order for $2 million per year, or orders nothing at all. This
year we did get an order for $2 million. Next year we think that there is a 60% chance he
will order; the year after we think the chance is 85%.

We will present the details for entering Zero-One Guy; the others you should figure out on your
own:
1

1. Remember that this customer either places an order for $2 million per year, or orders nothing
at all.
a. In cell C7 enter 2 indicating this years total.
b. In cell D7 enter = 2*BINOMINV(RAND(),1,0.6). (BINOMINV is used to generate
a Bernoulli RV.) This indicates that there is a 60% chance BINOMINV will return a 1,
and a 40% chance it will return a 0; the result will be multiplied by 2 million.
c. In cell E7 enter =2*BINOMINV(RAND(),1,0.85).
2.

Now enter the appropriate formulas for the other customers. When you have finished, you
will obtain a spreadsheet as follows:
Press F9 to recalculate the spreadsheet and see how the cell values change.

3.

To create as simulation table including 500 recalculations of the Total Sales, select the
range B8:E507 and then go to Add-Ins SimTools Simulation Table.

4.

From the 8th to the 507th row, each row represents a possible scenario for the sales over the
three years being considered. Provide the sample mean, sample standard deviation, and
percentile estimates for the sales next year and the year after.
For example, to calculate the 50th percentile estimate of the sales next year, enter in cell H8:
=PERCENTILE(D8:D507,0.5).

5.

On the same spreadsheet, calculate


the 95% interval estimate for the expected total sales next year.
the 95% interval estimate for the total sales you may achieve next year.

6.

Select the entire spreadsheet, and go to Add-Ins Formula List: all the formulas will be
displayed. Make the columns of the spreadsheet wide enough to display the formulas.

Electronic Submission: Save the file and email it to the course email address.

Please title your email LastName_AssignmentName.


Eg., Yang_Homework3, Yang_Project2
If technical difficulties are encountered with the gmail account, please use the
instructors email address.

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