Using the attached Microsoft Excel worksheet, conduct a what-if analysis to make financial projections. Based on the formulas indicated below for determining the Total Operating Income (H16), show the financial projections for the six-month period, from January to June. H16 should be $87,733.
Determine the assumption value to change in the Assumptions table for H16 to reach the goal of $95,000. To do so, use goal seeking to assess and report each assumption value (Margin %, Bonus, Commission, Newsstand Rental, Advertising, and Equipment Maintenance) to reach $95,000 in H16 and then recommend which assumption value (one and only one) to reach this goal.
In your analysis write-up, indicate the value for each assumption value after conducting a goal seeking. Explain your decision in selecting your chosen assumption value to cause the six-month operating income in cell H16 to increase from $87,733 to $95,000.
Note you will have to do the goal seeking six times to determine the assumption values and so make sure not to save the changes (do not click “OK” for Goal Seek Status) so your Total Operating Income is reset to $87,733 each time.
Cost of Good Sold = Revenue * (1 – Margin %)
Gross Margin = Revenue – Cost of Goods Sold
Bonus = IF Revenue is greater than the Sales for Revenue for Bonus then give the Bonus Amount otherwise give 0 –> must use a IF() function
Commission = Revenue * Commission %
Newsstand Rental = Revenue * Booth Rental %
Advertising = Revenue * Advertising %
Equipment Maintenance = Revenue * Equipment Maintenance %
Total Expenses = Sum of all Expenses for a specific month
Operating Income = Gross Margin – Total Expenses
Make sure to calculate the total for each line item. You should not be using any numbers in your formulas; only cell references should used except for the IF() function used for the Bonus as the false statement value is 0.
The formulas above are for the month of January. One you have entered the formulas for the first month, use the “fill handle” across the rest of the months. Note that the formulas do not indicate when to use relative, absolute and mixed cell references. You should know when to do so.
Microsoft Excel document with your analysis write-up in the comments section.
Correctness of the formulas in the worksheet (25%)
Use properly relative, absolute and mixed cell references (10%)
Correctness of the Total Operating Income value (10%)
Assumption values for each category after performing goal seeking (30%)
Analysis – choose the best assumption value to reach the goal of $95,000 with a detailed explanation (25%)
Need a refresher?
Review how to use the Goal Seek function in Microsoft Excel.
Review Excel: Relative vs Absolute Cell Reference
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