Topic 9 :

USING BUSINESS
MODELLING
TOOLS
Dr. Yurita Yakimin Abdul Talib
17 APRIL 2019
Introduction
• In the business world, you need to analyse your
data to see what nuggets of understanding you can
unearth.
• In Excel, analysing business data means using the
program’s business modelling tools.
• Tools and some analytic techniques that have many
uses. You’ll find out how to use Excel’s numerous
methods for what-if analysis, how to wield Excel’s
useful Goal Seek tool, and how to create scenarios.

BUSINESS MODELLING TOOLS

• What-If analysis
• Data Table
• Goal seek
• (e.g. product margin, break-even-
analysis)
• Scenarios
• Solver
• Solving complex problems

BUSINESS MODELLING TOOLS

Using What-If Analysis
• Excel’s What-If Analysis allows you to change the
values for formulas and see how those changes will
affect the outcomes of the formulas. There are three
types of What-If Analysis tools:
• Data Tables
• Goal Seek
• Scenarios

WHAT-IF ANALYSIS
EXAMPLE 1: CALCULATING FUTURE
VALUE
Assume you have RM5,000 cash now. You want to
invest the money at an interest rate of 6% per year.
You want to know what will be the future value of
the cash 5 years from now. In addition, you have
the following questions:
• What if the interest rate changes to 8%?
• What is the future value in 10 years from now?
• What if the initial investment increase to RM10,000?

WHAT-IF ANALYSIS
WHAT-IF ANALYSIS
EXAMPLE 2: SETTING A SELLING PRICE
Assume you own a toy shop and have 200 toys in
stock. You sell a certain % for toy A for RM50 and
a certain % for toy B of RM30.
• If you sell 80% for Toy A, cell D11 calculates a
total price of 160 * RM50 + 40 * RM30 =
RM9,200. Changing the % or the price will
automatically change the total price.

WHAT-IF ANALYSIS
WHAT-IF ANALYSIS
Data table is a range of cells that shows the
answers generated by formulas in which different
values have been substituted.
There are two types of data table:
• one-input data table - allows us to vary the
value in one cell only, either in column or
row
• two-input data table - allows us to vary the
values in two cells in column and row.

DATA TABLE
CREATING ONE-INPUT DATA TABLE
• Based on example 1, create a future value data
table of RM5,000 for a period of 20 years with
interest rate maintains at 6%.

DATA TABLE
DATA TABLE
ADDING MORE FORMULAS TO INPUT
TABLES
• You’re not restricted to using just a single
formula in a data table. If you want to see the
effect of the various input values on different
formulas, you can easily add them to the data
table.
• Example: Add present value of the investment.

DATA TABLE
CREATING TWO-INPUT DATA TABLE
• Based on example 1, create a future value data
table of RM5,000 for a period of 20 years with
interest rate varies from 3% to 10%.

DATA TABLE
DATA TABLE
EXERCISE
• Calculates the future value of an investment
based on five variables: the interest rate, period,
annual deposit, initial deposit, and deposit type.
• Now the questions begin:
• What if the interest rate is 7%?
• What if you deposit $8,000 per year? Or $12,000?
• What if you reduce the initial deposit?

DATA TABLE
• Now that suppose you want to see the future
value of the investment with the annual deposit
varying between $7,000 and $13,000.
• Create one-input data table.
• Add present value of investment input.
• Create two-input data table for interest rate
between 5% to 10%.

DATA TABLE
• Goal Seek is a process of achieving a specific goal by
determining input values. When you set up a worksheet
to use Goal Seek, you have a formula in one cell and
formula’s variable in another cell. Three elements
required to operate Goal Seek:
• Once cell as changing cell (variable). Goal Seek will
iteratively manipulate the value to reach the intended
Goal.
• Other input values to create the formula.
• Create a formula for Goal Seek to try to reach the goal.

GOAL SEEK
EXAMPLE
• Assume that you want to obtain ASB loan value
of RM5,000 in 5 years with fixed interest rate of
8% per year. You need to know what will be your
yearly deposit in order to obtain the value.

GOAL SEEK
GOAL SEEK
COST-VOLUME-PROFIT ANALYSIS
(BREAK-EVEN ANALYSIS)
• Cost-volume-profit analysis (CVP) is the analysis
of the effect of number of units (volume) on cost,
revenue and profit. In order to obtain break-even
point (BEP) you need determine the number of
units you have to sell of a product so that your
total profits are 0 (that is, the product revenue
equals the product costs).
• Setting up a profit equation with a goal of 0 and
varying the units sold is perfect for Goal Seek.

GOAL SEEK
CONTRIBUTION MARGIN APPPROACH
• We can calculate the BEP using contribution margin
approach.
• Contribution margin is the differences between
revenue and variable cost.
• When the volume reaches the break-even point, the
total contribution margin is equal to total fixed costs.
• In other words, BEP is where a company is not
making any profit or loss and the contribution margin
is only enough to cover the fixed cost.

GOAL SEEK
EXAMPLE
Merak Sdn Bhd sold 10,000 pieces of bracelets
throughout the month of December 2018 at a price of
RM30.00 per piece. The variable cost for each piece of
bracelet is RM12.00. The fixed cost is RM120,000.00.
Below is the income statement for the month of
December, 2018.

• Determine the number of bracelets to be sold at break-

even point.
• Calculate the new selling price if Merak Sdn Bhd target
to obtain RM100,000 profit in December 2018.

GOAL SEEK
TAKE HOME EXERCISE
Refer BumiCommerce

GOAL SEEK
Solving Complex Problems with Solver
• Solver is a very powerful Excel tool to solve complex
problems such as:
• determining product mix to maximize profit,
• calculating target score tests to obtain desired grade,
calculating resources to maximize utilization,
determining routes to minimize shipping costs and many
more.
• Solver, similar to Goal Seek, uses an iterative method to
determine best results.

SOLVER
Solving Complex Problems with Solver
• However, Solver is different from Goal Seek for the
following advantages:
• Solver enables multiple changing cells.
• Solver enables to set up constraints on the
changing cells.
• Solver seeks not only desired but also optimal
result.
• For more complex problems, Solver can generate
multiple solutions.

SOLVER
LOADING SOLVER
• Before you can you Solver, you need to load Solver. To
load the Solver, follow these steps:
• Step 1: Select File  Option  Adds-In
• Step 2: In the Manage list, click Add-ins and then click Go.
• Step 3: On the Add-Ins dialog box, select (tick) Solver Add-
in check box.
• Step 4: Click OK.

SOLVER
CASE EXAMPLE
• Jelly Soft Sdn Bhd is an ice-cream producer located
in Jitra, Kedah. Currently, Jelly Soft Sdn Bhd
produces three ice-cream flavors – Chocolate,
Strawberry and Vanilla. Data regarding the selling
price (per box), variable expenses, and consumption
of labor hours, machine hours and important
materials to produce one box of each flavor are as
follows:

SOLVER
 Chocolate Strawberry Vanilla
Selling price RM12.00 RM11.50 RM10.00
Variable expenses RM7.50 RM6.50 RM4.00
Labour hours (per 2 1.5 0.5
box)
Machine hours (per 1.5 2 1
box)
Monthly demand 1,200 3,000 2,000
(box)
The factory capacity is limited to the available machine
hours, where 18000 machine hours are available every
month. Determine the production mix that will maximize
the company’s profit for the coming period.

SOLVER