Example 1

1 2 3 4
1 1 2 3 4
2 2 4 6 8
3 3 6 9 12
4 4 8 12 16
5 5 10 15 20
6 6 12 18 24
7 7 14 21 28
8 8 16 24 32
9 9 18 27 36
10 10 20 30 40

Example 2

If price schedule were :

first 500 gallons at 23
Next 500 gallons at 20
Additional gallons at 15

Cost of 1600 galon is $ 33,500.00

Cost of 483 galon is $ 11,109.00
Cost of 2001 galon is $ 41,520.00

Actual Problem Scenario

Cost of 1600 galon is 30500

Cost of 483 gallon is 11109
Cost of 2001 gallon is 36515

Example 3
Alternative Calculation Method

For the price schedule in the problem

First 500 gallons at 23
Next 500 gallons at 20
Additional gallons at 15
 cost

1 Determine from quantity (1600, 483, 2001), how many gallons involved to First500(500 gallon at 23.00/
how ?
use MIN function
= MIN(1600,First500) yields 500
= MIN(483,First500) yields 483
=
= MIN(2001,First500)
IF(Quantity1<=500), yields 500
0,
IF(Quantity1>=SUM(First500,Next500),
2 Use IF statement to handle 2nd row quantity (up to 1000 gallon)
next500,
Quantity1-first500)

1600 483 2001

gallons gallons gallons
gals/price levelgals/price levelgals/price level
500 483 500
500 0 20
600 0 1001
 5 6 7 8 9 10
5 6 7 8 9 10
10 12 14 16 18 20
15 18 21 24 27 30
20 24 28 32 36 40
25 30 35 40 45 50
30 36 42 48 54 60
35 42 49 56 63 70
40 48 56 64 72 80
45 54 63 72 81 90
50 60 70 80 90 100

Syntax
IF(condition-to-test, value-if-condition-true, value-if-condition-false)
SUMPRODUCT(First500:Next,Price_for_500:Price_for>500)

per gallon
per gallon
per gallon

1600 483 2001

gallons gallons gallons
gas/price level gas/price level gas/price level
500 483 500
500 500
0 0 0
olved to First500(500 gallon at 23.00/gallon)
Web Service Problem : Forecasting & Charting

The Exercise
You have an idea for a new web service that offers customized workouts for subscribers.
Build a spreadsheet to calculate:
1) the number of new customers each month, and
2) the total customer base (cumulative number of customers signed up) each
month.
Model projections for 60 months using these two scenarios:
1) Total market potential is 1,000,000 customers. Each month you sign up 2% of
customers in the market that have not yet signed up.
2) Total market potential is initially 1,000,000 customers but grows at 1% per
month. Each month you sign up 2% of customers in the market that have not
yet signed up.
Use Excel’s Chart Wizard to make a graph comparing the total customer base under
each of the two scenarios. What type of graph is appropriate?

Scenario A Scenario B
Total Market Potential 1000000 Initial total market
% remaining captured/period 0.02 Market size growth/period
% remaining captured/period

Period New Customers Total Customers Period Total Market

0 £ - £ - 0 0.00
1 20000 £ 20,000.00 1 1,000,000.00
2 19600 £ 39,600.00 2 1,010,000.00
3 19608 £ 59,208.00 3 1,020,100.00
4 19607.84 £ 78,815.84 4 1,030,301.00
5 19607.8432 £ 98,423.68 5 1,040,604.01
6 19607.843136 £ 118,031.53 6 1,051,010.05
7 19607.84313728 £ 137,639.37 7 1,061,520.15
8 19607.84313725 £ 157,247.21 8 1,072,135.35
9 19607.84313726 £ 176,855.06 9 1,082,856.71

Total Customer
1200000

1000000

800000
 1200000

1000000

800000

T
Total Customer

T
600000

400000

200000

0
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60
 Model projection for 60 months fo
scenario a :
market potential
monthly sign up rate

scenario b
initial market potential
monthly market growth rate
monthly sign up rate

Task
Build a spreadsheet to calculate :
a. Number of new customers each
b. total customer base (cumulative

Scenario A
1000000 Month
0.01 0
0.02 1
2
New Customers Total Customers 3
0.00 0.00 4
20,000.00 20,000.00 5
19,800.00 39,800.00 6
20,006.00 59,806.00 7
20,205.90 80,011.90 8
20,407.96 100,419.86 9
20,612.04 121,031.90 10
20,818.16 141,850.07 11
21,026.34 162,876.41 12
21,236.61 184,113.02 13
14
15
16
17
18
19
20
21
22
 23
24
25
26
27
Total Customer
28
Total Customer
29
30
31
32
33
34
35
36
37
38
39
8 51 54 57 60 40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Model projection for 60 months for 2 scenario
scenario a :
market potential 1000000
monthly sign up rate 2% from balance that not yet sign up

initial market potential 1000000

monthly market growth rate 1%
monthly sign up rate 2% from balance that not yet sign up

Build a spreadsheet to calculate :

a. Number of new customers each month
b. total customer base (cumulative number of customer sign up)

Scenario A Scenario B
No of New CustomerTotal Customer Month Market Potential
0.00 0.00 0.00 0.00
20,000.00 20,000.00 1.00 1,000,000.00
19,600.00 39,600.00 2.00 1,010,000.00
19,208.00 58,808.00 3.00 1,020,100.00
18,823.84 77,631.84 4.00 1,030,301.00
18,447.36 96,079.20 5.00 1,040,604.01
18,078.42 114,157.62 6.00 1,051,010.05
17,716.85 131,874.47 7.00 1,061,520.15
17,362.51 149,236.98 8.00 1,072,135.35
17,015.26 166,252.24 9.00 1,082,856.71
16,674.96 182,927.19 10.00 1,093,685.27
16,341.46 199,268.65 11.00 1,104,622.13
16,014.63 215,283.28 12.00 1,115,668.35
15,694.33 230,977.61 13.00 1,126,825.03
15,380.45 246,358.06 14.00 1,138,093.28
15,072.84 261,430.90 15.00 1,149,474.21
14,771.38 276,202.28 16.00 1,160,968.96
14,475.95 290,678.23 17.00 1,172,578.64
14,186.44 304,864.67 18.00 1,184,304.43
13,902.71 318,767.38 19.00 1,196,147.48
13,624.65 332,392.03 20.00 1,208,108.95
13,352.16 345,744.19 21.00 1,220,190.04
13,085.12 358,829.30 22.00 1,232,391.94
12,823.41 371,652.72 23.00 1,244,715.86
12,566.95 384,219.66 24.00 1,257,163.02
12,315.61 396,535.27 25.00 1,269,734.65
12,069.29 408,604.56 26.00 1,282,432.00
11,827.91 420,432.47 27.00 1,295,256.31
11,591.35 432,023.82 28.00 1,308,208.88
11,359.52 443,383.35 29.00 1,321,290.97
11,132.33 454,515.68 30.00 1,334,503.88
10,909.69 465,425.37 31.00 1,347,848.92
10,691.49 476,116.86 32.00 1,361,327.40
10,477.66 486,594.52 33.00 1,374,940.68
10,268.11 496,862.63 34.00 1,388,690.09
10,062.75 506,925.38 35.00 1,402,576.99
9,861.49 516,786.87 36.00 1,416,602.76
9,664.26 526,451.13 37.00 1,430,768.78
9,470.98 535,922.11 38.00 1,445,076.47
9,281.56 545,203.67 39.00 1,459,527.24
9,095.93 554,299.60 40.00 1,474,122.51
8,914.01 563,213.60 41.00 1,488,863.73
8,735.73 571,949.33 42.00 1,503,752.37
8,561.01 580,510.35 43.00 1,518,789.89
8,389.79 588,900.14 44.00 1,533,977.79
8,222.00 597,122.14 45.00 1,549,317.57
8,057.56 605,179.69 46.00 1,564,810.75
7,896.41 613,076.10 47.00 1,580,458.85
7,738.48 620,814.58 48.00 1,596,263.44
7,583.71 628,398.29 49.00 1,612,226.08
7,432.03 635,830.32 50.00 1,628,348.34
7,283.39 643,113.71 51.00 1,644,631.82
7,137.73 650,251.44 52.00 1,661,078.14
6,994.97 657,246.41 53.00 1,677,688.92
6,855.07 664,101.48 54.00 1,694,465.81
6,717.97 670,819.45 55.00 1,711,410.47
6,583.61 677,403.06 56.00 1,728,524.57
6,451.94 683,855.00 57.00 1,745,809.82
6,322.90 690,177.90 58.00 1,763,267.92
6,196.44 696,374.34 59.00 1,780,900.60
6,072.51 702,446.86 60.00 1,798,709.60
Monthly Sign Up RaTotal Customer
0.00 0.00
20,000.00 20,000.00
19,800.00 39,800.00
19,606.00 59,406.00
19,417.90 78,823.90
19,235.60 98,059.50
19,059.01 117,118.51
18,888.03 136,006.55
18,722.58 154,729.12
18,562.55 173,291.67
18,407.87 191,699.55
18,258.45 209,958.00
18,114.21 228,072.20
17,975.06 246,047.26
17,840.92 263,888.18
17,711.72 281,599.90
17,587.38 299,187.28
17,467.83 316,655.11
17,352.99 334,008.10
17,242.79 351,250.88
17,137.16 368,388.05
17,036.04 385,424.09
16,939.36 402,363.44
16,847.05 419,210.49
16,759.05 435,969.54
16,675.30 452,644.84
16,595.74 469,240.59
16,520.31 485,760.90
16,448.96 502,209.86
16,381.62 518,591.48
16,318.25 534,909.73
16,258.78 551,168.51
16,203.18 567,371.69
16,151.38 583,523.07
16,103.34 599,626.41
16,059.01 615,685.42
16,018.35 631,703.77
15,981.30 647,685.07
15,947.83 663,632.90
15,917.89 679,550.79
15,891.43 695,442.22
15,868.43 711,310.65
15,848.83 727,159.48
15,832.61 742,992.09
15,819.71 758,811.81
15,810.12 774,621.92
15,803.78 790,425.70
15,800.66 806,226.36
15,800.74 822,027.10
15,803.98 837,831.08
15,810.35 853,641.43
15,819.81 869,461.24
15,832.34 885,293.57
15,847.91 901,141.48
15,866.49 917,007.97
15,888.05 932,896.02
15,912.57 948,808.59
15,940.02 964,748.61
15,970.39 980,719.00
16,003.63 996,722.63
16,039.74 1,012,762.37
4. Pro Forma Problem
Forecasting, Data Table, Goal Seek
The Exercise
You have founded a company to sell thin client computers to the food processing
industry for Internet transaction processing. Before investing in your new company, a
venture capitalist has asked for a five year pro-forma income statement showing unit
sales, revenue, total variable cost, marketing expense, fixed cost, and profit before tax.
You expect to sell 1,600 units of the thin client computers in the first year for $1,800 each.
Swept along by Internet growth, you expect to double unit sales each year for the next
five years. However, competition will force a 15% decline in price each year.
Fortunately, technical progress allows initial variable manufacturing costs of $1,000 for
each unit to decline by 6% per year. Fixed costs are estimated to be $1,000,000 per year.
Marketing expense is projected to be 14% of annual revenue. When it becomes profitable
to do so, you will lease an automated assembly machine that reduces variable
manufacturing costs by 20% but doubles the annual fixed cost; the new variable
manufacturing cost will also decline by 6% per year. Net present value (NPV) will be
used to aggregate the stream of annual profits, discounted at 15% per year.1
a) Ignoring tax considerations, build a spreadsheet for the venture capitalist.
b) How many units do you need to sell in the first year to break even in the first
year?
c) How many units do you need to sell in the first year to break even in the second
year?

5 year proforma income statement

sales , revenue , total variable costs , marketing expense, fixed costs , profit before tax

1st year expected sales 1600 unit

cost per unit 1800 unit
rate of production increase rate for next 5 year 200% percent
rate of annual price decline for the next 5 year 15% percent
initial manufacturing costs 1000 unit
annual decline rate 6% percent
Fixed costs 1000000 per year
Marketing expense 14 percent from annual revenue
to lease ssembly machine when the cost pasts break even
Manufacturing costs after least 80% from initial manufacturing costs
fixed costs after lease 200% from annual fixed costs
rate of manufaction cost decline after lease 6% per year
NPV will be used to aggregate the stream of annual profits
discount rate 15% per year

Problem
a. Build a spreadsheet for venture capitalist (ignore tax consideration) ( pro-forma statement )
b. How many unit you need to sell in the first year to break even in first year ?
c. How many unit to sell in the first year to break even in second year ?

Year 1 Year 2 Year 3

Unit Sales 1,300.00 2,600.00 5,200.00
Unit Price 1,800.00 1,530.00 1,300.50
Revenue 2,340,000.00 3,978,000.00 6,762,600.00
Total Variable Costs ( Unit Manufacturing Costs ) 1,000.00 940.00 883.60
Unit Manufacturing Costs ( Lease ) 800.00 752.00 706.88
Total Manufacturing Costs 2,300,000.00 3,444,000.00 5,594,720.00
Lease ? NO NO NO
Marketing Expense 327,600.00 556,920.00 946,764.00
Profit before Tax -287,600.00 -22,920.00 221,116.00
NPV £1,339,189.42

Question 1 - How many unit you need to sell in the first year to break even in the first year ?
- in the problem you expect to sell 1,600 unit . but with basic model in pace, can vary the module to find actual break ev
- use forecasting tool ( specifically : sensitivity analysis ) to find number of unit to break even .

-287,600.00 -22,920.00
1300 -287600
1350 -260200
1400 -232800
1450 -205400
1500 -178000
1550 -150600
1600 -123200
1650 -95800
1700 -68400
1750 -41000
1800 -13600
1850 13800
1900 41200
 Assumption Regular Lease automated machinery
Unit Sales, First Year 1600
Unit Price, First Year 1800
Unit Manufacturing Cost 1000 800
Yearly sales growth 100%
Yearly price fall 15%
Yearly decline in manufacturing costs 6% 6%
Marketing expense as % of revenue 14%
Yearly fixed cost 1000000 2000000
Discount rate 15%
 Year 4 Year 5
10,400.00 20,800.00
1,105.43 939.61
11,496,420.00 19,543,914.00
830.58 780.75
664.47 624.60
8,910,458.88 14,991,662.69
YES YES
1,609,498.80 2,736,147.96
976,462.32 1,816,103.35

ule to find actual break even point

Objective - To find the unit costs to get break even within a year
that is why we use data table ( sensitivity analysis ) ( what if analysis )
Data Relationship Problem

Number of Machine Working Vs Number of Processing minutes achieved. 140

18 spot checks every 30 min
Use Chart to make x-y scatter plot of data
120
# Machines Minutes
7 97
6 86 100
5 78
1 10 80

Minutes
5 75
4 62 60
7 101
3 39
40
4 53
2 33
8 118 20
5 65
2 25 0
5 71 0 1 2
7 105
1 17
4 49
5 68

The more machines working , the higher number of processing minutes achieved

If using a LINE CHART ?

More Notes on the use of XY( Scatter) Plot.
Time Temp Predicted Temp -- example of using
time: x value xy/scatteraxis
on horizontal plot to show relation
8.01 23 21 - 2 data series for y : Actual and predicted temp
8.25 23 22
9.01 24 22
9.25 26 23
10.01 28 25
10.25 28.5 26
11.01 29 27
11.25 29.3 27
12.01 32 28.5
12.25 32 29.5
13.01 35 30
13.25 35.5 31

what happen if you select the wrong chart type for data
- xy plot is unique becuas eof the way it treat data.
- if use other then the scatter plot data ( Line & column ) chart . They look meaning ful because , they happen to include

-
 Minutes vs # Machines
140

120

100

80
Minutes

Minutes 97 86 78
60

40

20

0
0 1 2 3 4 5 6 7 8 9

# Machines

Excel chooses 1 to 18 for the X axis

- becuase there are 18 rows of data.

For Y axis , it cooses a scale that can accomodate the largest number in data set.

Then it plots machine and minutes , separately, each as district line.

hard to tell , whan this chart try to convey .

/scatter plot to show relationship between data series
zontal axis
Actual and predicted temp

ause , they happen to include time in regular interval as X axis .