Profit = Revenue – total cost

Chapter 14
Total cost = FC + VC
Basics: Monte Carlo Simulation.
Revenue = Price* no. of units
Base case: Profit is found by using “Most likely Values”: The middle ones
Worst Case: Profit is found with max cost and minimum demand.
Best Case: Profit is found with min cost and max demand. Expected freq= Prob *10

Calculating out of 100 or more samples.

For Variable Cost per Unit.
We use: =Vlookup 1. Insert function, Vlookup
2. Look up value is the random number; table array is the table of values without titles.
3. Col index is the number where the $ cost value is. Eg ln=0.1 hn= 0.4 cost/unit=$35,
Since the number is in the 3rd column we use 3.
4. When copying down the function don’t forget to use the absolute value for the table
values.
For Secondary VC/unit.
This is for uniform distribution values.
We use the formula : C= a+(b-a)*r ; a= lower limit, b= higher limit, r= random number.
For Finding Demand.
If st.dev and mean are given we use: “=norm.inv(r,mean,st.dev)”
If not, we use: we use the uniform distribution formula: D=a+(b-a) *r
For Finding Profit Summary Statistics
We use the formula given in the box. Sample Size : “=count(range of samples)”
Mean Profit : “=average(Profit range)”
Standard dev: “=stdev.s(profitrange)”
Max profit or min profit we use “=max”, “=min” functions
Number of losses: “=countif(profit,”<0”)”
𝑁𝑜.𝑜𝑓 𝑙𝑜𝑠𝑠𝑒𝑠
Probability of loss : 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑖𝑧𝑒
Value at risk : Eg. Value at risk at 5% means 5th Percentile.
“=percentile.exc(profit,5%)”
Constructing a frequency distribution
1. Construct a table with upper limits and lower limits
2. Find frequency : “=freq(profit,higherlimits)” Ctrl+Shift+Enter

Chapter 11 P1: Linear Programming Formulation

Whatever it is READ THE QUESTION PROPERLY.
Formulation: 1. Write decision variables(usually given)
2. Write objective function (max or min sth?) Usually given about investment rates or resource allocation.
3. Write down constraints.
Chapter 11 P2: Solving the Linear Program
Involves 2 steps:
1. Set up model on the excel sheet; fill in the constraints and objectives appropriately.
- Initially, we leave the solution cells blank, fill in the objective and constraints.
- To find the Profit or the LHS, we can use manual formula or the sumproduct.
- When using the sumproduct, coefficient array first then the variables.
- Slack = RHS – LHS
2. Solve using Add-In
1. Make sure the add-in is available on your computer. “Solver-Add-in”
2. Choose “DATA” ribbon, go to the far right, then click “Solver”.
3.Then a box appears, In the set objective space, select the cell which gives you the totalprofit. Choose Max, Min
4. In the changing variables cells: you put the solution cells.
5. When adding the constraints, in cell reference: LHS
In constraint: RHS
6. Choose the non-negativity box and then Simplex LP. Then Solve.
When messing with the Formation, Remember to save the file before messing with it.

Chapter 13: Project Scheduling

Drawing Project Network Diagram

Each Activity box(node) will look like this:

ES = Earliest Short Time Work forwards For initial activities, ES=0, ES = Max (immediate predecessor’s EFs)
EF = Earliest Finish Time EF = ES + T

LS = Latest Start Time Work Backwards For final activities, LF = EF of its own node , when there are 2 end node;
choose the higher
LF = Latest Finish Time LS = LF -t LF= Min (immediate successor LS)

Note : The EF of the final activity before the finish node, is the time needed to finish the project. (If there are two choose
the bigger number.

Slack time: the length of time an activity can be delayed without delaying the entire project.

Slack = LS –ES

In order to find the critical path, we need to find the slack times of each nodes.
Critical path is along the activities with 0 slack.

To create a Grantt chart,

- Select Data, usually the

- Choose Stacked bar chart
- The activities will be inverted to switch it to A-H, right click on the vertical axis and Format,
check categories in reverse order.
- Choose no fill for ES.