2. Visual Overview XP
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3. Data Tables and What-If Analysis XP
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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
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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
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6. Determining the Break-Even Point
XP
• Break-even point: revenue equals expenses
• A CVP chart shows the relationship between
expenses and revenue
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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
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8. Performing a What-If Analysis with XP
Goal Seek
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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
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10. Charting a One-Variable Data Table
XP
• Gives a better picture of relationship between
sales volume, revenue, and total expenses
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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
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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
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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
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18. Using the Scenario Manager XP
• Edit Scenario dialog box
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19. Using the Scenario Manager XP
• Scenario Values dialog box
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20. Using the Scenario Manager XP
• View the effect of each scenario by selecting it
in the Scenario Manager dialog box
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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
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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
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24. Creating a Scenario PivotTable Report
XP
• Displays results from each scenario as a pivot
field in a PivotTable
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25. Creating a Scenario PivotTable Report
XP
• Results for the table can be displayed in a
PivotChart
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26. Visual Overview XP
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27. Using Solver XP
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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
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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
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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
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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
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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
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33. Setting Up Solver to Find a Solution XP
• Specify three Solver parameters
– Objective cell
– Variable (or changing) cells
– Constraints
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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
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35. Setting Up Solver Constraints XP
• Add Constraint dialog box
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36. Setting Up Solver Constraints XP
• Completed Solver Parameters dialog box
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37. Creating a Solver Answer Report XP
• Solver can create three different reports
– Answer report (the most useful)
– Sensitivity report
– Limits report
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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
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39. Creating a Solver Answer Report XP
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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
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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
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42. Saving and Loading Solver ModelsXP
• Saved Solver model
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