Solver Excel Example – An easy to understand example
I’ve received many emails lately about how to use solver in Excel. Let’s take an example of a training institute. Depending on the number of students per month and the average fees that it charges, we can calculate the annual income. Similarly we can compute the annual expenses. Now the annual profit before taxes and depreciation will be equal to the income minus the expenses. The institute owner is not happy. He wishes his income to be 1000000. To do that he has to get more students and/or decrease his expenses. Of course, he cannot have unlimited number of students and he cannot reduce his expenses to zero. So he has to work within certain constraints. Using these details we can ask solver to provide a solution.
So our target cell is the profit in cell b3.
Our profit dpends on the number of students in cells e3 to e14. They cannot be unlimited and they cannot be fractions. Our profit also depends on the fees that we charge and we cannot charge what we like but as per market conditions. The average fee is in cells F3 to F15.
Our profit also depend on how we control our expenses. Here also we face constraints. So we can reduce our expenses only upto to a certain extent.
Therefore we need to provide Solver with some constraints so that it can help us to find a good solution.
Now let’s see how we can solve the problem and learn how to use the basics of Solver in Excel.
- Click on data tab and from the Analysis area we then select Solver
- In the dialog box our target cell is B3 which represents the profit. We wish to set it to 10000000. If we set it to 0 we can calculate the breakeven.
- In the changing cells we select the average fees (F15), K3:K14 represents the total monthly expenses, E3:E14 represents the number of students and J3:J14 represents the other expenses which forms the part of the total expenses. Now these cells are related to the income and expenses which when changed influence the amount of profit made.
- Finally we add our constraints. For example our students cannot be fractions and therefore they are defined as integers. Our other expenses cannot be less than 13500 but also not more than 15000 and so on.
Then we click on “Solve’ to learn whether Solver finds a solution.
Watch the video below to learn about the feature: