1. Computer Applications for Business
Week 5
Spreadsheet Applications

2. Business Application Packages
Last Week
Introduction to Spreadsheets
“What if” models
This week – More on Spreadsheets [Knight (1999) Ch.5]
Choosing a company car
Assessing the Business Case for an Investment
Useful Excel functions – IF, LOOKUP
A currency conversion example

3. Handling Numeric Data
Last week we looked at spreadsheets as a way of recording and modelling business finances
You should already know how to:
Calculate results from a combination of values on the spreadsheet, using + - / * and the functions SUM and AVERAGE
Copy and replicate cells
Format numbers, money and dates
Exploit the way that Excel adjusts row and column addresses when you copy formulae about.. .. and how to avoid it when it’s undesirable
Create a simple graph to display data
Let’s now apply these ideas to business problems

4. “What If” models
Consider making a choice of Company Car (we should be so lucky!)
Will depend on:
monthly leasing cost, including extras
how much of this the Company pays
Tax payable (depends on list price of car)
Fuel costs (depend on mileage and thirst)
We can use published price and fuel economy data
Plug in assumptions about distance covered
Evaluate costs with and without options
Then vary some of the assumptions
Mileage, fuel cost, tax rates

5. Example from 1995 Fuel Price Allowance Personal Use Charge is:
Monthly Cost of Ownership
minus allowance
Extras:
Add to taxable price
Increase CoO
Tax payable is percentage of value less PUC
Gives cost to keep car
Add fuel to compute total cost
Fuel Price
Allowance

6. Putting it together Then vary mileage, fuel price, tax assumptions...
The only extras I cared about
Private Use Charge + Tax + Fuel
Then vary mileage, fuel price, tax assumptions...

7. Making an Investment Decision
Business consist largely of taking calculated risks with the expectation of their being profitable
How do we calculate the risk?
And the potential gains to be made?
A good guess is that “Tomorrow will be like today, unless somebody does something to make it different”
So project forward the “Business as usual” situation
And compare with result of making the change
Justify any assumptions
Cost out the impact of the investment
Set goal for the profit that will justify investment
Usually have “hurdle rate” below which it’s not worth the trouble of further investigation

8. Evaluate this Business Case
Your company issues its software on diskettes, and this is becoming a significant expense as the size of your product increases.
You ship 1000 packages a week, and have been offered a CD-burner that can handle all your production requirements in 3 hours a day, but it costs £15,000.
The blank discs cost £1 each, making them only slightly cheaper than the six 20p diskettes you currently use for each package. CD labels cost you 10p each, against the 2p for diskette labels.
Assume that you need someone dedicated to the machine for one hour each day, to set up a production run – this is the same labour cost currently incurred setting up to copy diskettes. Assume also that your current diskette-copier is fully-depreciated, but may start needing maintenance in the next year.
Work out the cost of producing the media component of each package. Do the savings obtained justify the proposed investment? What changes are likely to improve or degrade this business-case?

9. A Possible Approach
Correct this error

10. An Aside on Dates Exercise – Work out how to produce these formats
Newspapers think the “Year 2000” problem was about 2-digit years in programs
Reasonably true for Mainframe Computers
Not a significant problem for PC users
Spreadsheets store dates as offset from 1900
Unless you deliberately subvert this!
What you see is just a result of formatting
All these are different formats for “10/03/1999”
Exercise – Work out how to produce these formats

11. Excel Functions We’ve already met SUM(range) and AVERAGE(range)
Other useful functions are:
TODAY() gives today’s date
NOW() gives current date and time (useful on print-out)
WEEKDAY(somedate) gives day in range 1:7 (Sun=1)
WEEKDAY(somedate,2) gives day in range 1:7 (Mon=1)
Logical Functions:
IF(test, value-if-true, value-if-false) for example IF(2=(WEEKDAY(TODAY())),"BS1904","Other")

12. Questions ?