When you run an organization, you must track how every
element performs, both in absolute terms and in relation to other parts
of the organization. Just as you might want to reward your employees for
maintaining a perfect safety record and keeping down your insurance
rates, you might also want to stop carrying products you cannot
sell.
When you plan how you want to grow your business, you should have
specific goals in mind for each department or product category. For
example, Lori Penor of Consolidated Messenger might have the goal of
reducing the firm’s labor costs by 20 percent as compared to the
previous year. Finding the labor amount that represents a 20-percent
decrease is simple, but expressing goals in other ways can make finding
the solution more challenging. Instead of decreasing labor costs 20
percent over the previous year, Lori might want to decrease labor costs
so they represent no more than 20 percent of the company’s total
outlay.
As an example, consider a worksheet that holds cost figures for
Consolidated Messenger’s operations and uses those figures to calculate
both total costs and the share each category has of that total.
Important
In the worksheet, the values in the Share row are displayed as
percentages, but the underlying values are decimals. For example,
Excel represents 0.3064 as
30.64%.
Although it would certainly be possible to figure the target
number that would make labor costs represent 20 percent of the total,
there is an easier way to do it in Excel: Goal Seek. To use Goal Seek,
you display the Data tab and then, in the Data Tools group, click
What-If Analysis. On the menu that is displayed, click Goal Seek to open
the Goal Seek dialog box.
Important
If you save a workbook with the results of a Goal Seek
calculation in place, you will overwrite the values in your
workbook.
In the dialog box, you identify the cell with the target value; in
this example, it is cell C4, which has the percentage of costs accounted
for by the Labor category. The To Value field has the target value (.2,
which is equivalent to 20 percent), and the By Changing Cell field
identifies the cell with the value Excel should change to generate the
target value of 20 percent in cell C4. In this example, the cell to be
changed is C3.
Clicking OK tells Excel to find a solution for the goal you set.
When Excel finishes its work, the new values appear in the designated
cells, and the Goal Seek Status dialog box opens.
Tip
Goal Seek finds the closest solution it can without exceeding
the target value. In this case, the closest percentage it could find
was 19.97 percent.
In this exercise, you’ll use Goal Seek to determine how much you
need to decrease transportation costs so those costs make up no more
than 40 percent of Consolidated Messenger’s operating costs.
-
On the Data tab, in the
Data Tools group, click What-If Analysis and then, in the list,
click Goal
Seek.
The Goal Seek dialog box opens.
-
In the Set cell field, type
D4.
-
In the To value field, type
.4.
-
In the By changing cell
field, type D3.
-
Click OK.
Excel displays the solution in both the worksheet and the Goal
Seek Status dialog box.
-
Click Cancel.
Excel closes the Goal Seek Status dialog box without saving
the new worksheet values.
Clean Up
Save the TargetValues workbook, and then close it.
