Tutorial 10: Performing What-IF Analyses
- 1. Tutorial 10: Performing What-If Analyses Microsoft Office Excel 2010 ® ®
- 2. Visual Overview XP New Perspectives on Microsoft Excel 2010 2
- 3. Data Tables and What-If Analysis XP New Perspectives on Microsoft Excel 2010 3
- 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 analysis New Perspectives on Microsoft Excel 2010 4
- 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 fixed New Perspectives on Microsoft Excel 2010 5
- 6. Determining the Break-Even Point XP • Break-even point: revenue equals expenses • A CVP chart shows the relationship between expenses and revenue New Perspectives on Microsoft Excel 2010 6
- 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 box New Perspectives on Microsoft Excel 2010 7
- 8. Performing a What-If Analysis with XP Goal Seek New Perspectives on Microsoft Excel 2010 8
- 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 cells New Perspectives on Microsoft Excel 2010 9
- 10. Charting a One-Variable Data Table XP • Gives a better picture of relationship between sales volume, revenue, and total expenses New Perspectives on Microsoft Excel 2010 10
- 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 cell New Perspectives on Microsoft Excel 2010 11
- 12. Creating a Two-Variable Data Table XP New Perspectives on Microsoft Excel 2010 12
- 13. Charting a Two-Variable Data Table XP New Perspectives on Microsoft Excel 2010 13
- 14. Visual Overview XP New Perspectives on Microsoft Excel 2010 14
- 15. What-If Scenarios XP New Perspectives on Microsoft Excel 2010 15
- 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 reports New Perspectives on Microsoft Excel 2010 16
- 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 worksheet New Perspectives on Microsoft Excel 2010 17
- 18. Using the Scenario Manager XP • Edit Scenario dialog box New Perspectives on Microsoft Excel 2010 18
- 19. Using the Scenario Manager XP • Scenario Values dialog box New Perspectives on Microsoft Excel 2010 19
- 20. Using the Scenario Manager XP • View the effect of each scenario by selecting it in the Scenario Manager dialog box New Perspectives on Microsoft Excel 2010 20
- 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 scenario New Perspectives on Microsoft Excel 2010 21
- 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 meetings New Perspectives on Microsoft Excel 2010 22
- 23. Scenario Summary Report XP New Perspectives on Microsoft Excel 2010 23
- 24. Creating a Scenario PivotTable Report XP • Displays results from each scenario as a pivot field in a PivotTable New Perspectives on Microsoft Excel 2010 24
- 25. Creating a Scenario PivotTable Report XP • Results for the table can be displayed in a PivotChart New Perspectives on Microsoft Excel 2010 25
- 26. Visual Overview XP New Perspectives on Microsoft Excel 2010 26
- 27. Using Solver XP New Perspectives on Microsoft Excel 2010 27
- 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 price New Perspectives on Microsoft Excel 2010 28
- 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 values New Perspectives on Microsoft Excel 2010 29
- 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 price New Perspectives on Microsoft Excel 2010 30
- 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 values New Perspectives on Microsoft Excel 2010 31
- 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 activated New Perspectives on Microsoft Excel 2010 32
- 33. Setting Up Solver to Find a Solution XP • Specify three Solver parameters – Objective cell – Variable (or changing) cells – Constraints New Perspectives on Microsoft Excel 2010 33
- 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 AllDifferent New Perspectives on Microsoft Excel 2010 34
- 35. Setting Up Solver Constraints XP • Add Constraint dialog box New Perspectives on Microsoft Excel 2010 35
- 36. Setting Up Solver Constraints XP • Completed Solver Parameters dialog box New Perspectives on Microsoft Excel 2010 36
- 37. Creating a Solver Answer Report XP • Solver can create three different reports – Answer report (the most useful) – Sensitivity report – Limits report New Perspectives on Microsoft Excel 2010 37
- 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 slack New Perspectives on Microsoft Excel 2010 38
- 39. Creating a Solver Answer Report XP New Perspectives on Microsoft Excel 2010 39
- 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 solution New Perspectives on Microsoft Excel 2010 40
- 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 box New Perspectives on Microsoft Excel 2010 41
- 42. Saving and Loading Solver ModelsXP • Saved Solver model New Perspectives on Microsoft Excel 2010 42