CHAPTER 13: VLOOKUP()

CHAPTER 13: VLOOKUP() You can look it up. Casey Stengel Consider a telemarketing business. A customer places an order by calling a receptionist, who asks for his or her name, address, and ZIP code, among other things. Other things do not include the customer s city or state, for, if we know one s ZIP code, we already know his or her city and state. The trick is to get that information into the spreadsheet as efficiently as possible. ZIP CODE EXAMPLE Let s say we have entered a table of ZIP codes in our spreadsheet, such as the one below: AA AB AC 1 ZIP CODE TABLE 2 ZIP CITY STATE 3 11701 Amityville NY 4 11702 Oak Beach NY 5 11703 North Babylon NY 6 11704 West Babylon NY Now, when a customer calls, we enter the information in the table below (to keep things simple, we are omitting the street address, credit card number, and so on). We ask her last name, and type Smith in cell A3. We ask her first name, and type Sue in cell B3. Finally, we ask her ZIP Code, and enter 11701 in cell E3. 1 CUSTOMER TABLE 2 Last First City State ZIP 3 Smith Sue 11701 4 We can place a formula in cell C3 that will look up Sue s ZIP Code in the ZIP Code table and return the proper city. Another formula in D3 will look up the ZIP code and return Sue s state. The key to these formulæ is the VLOOKUP() function, one of Excel s most powerful and least obvious functions. USING VLOOKUP() The general form of the VLOOKUP() function is: where =VLOOKUP(target,table,column) target is the cell that contains the number we are going to look up; table is the table in which we will look; and, column is the column number from that table that contains the desired value. To illustrate its use in the previous example: Step 1: In cell C3, type: =VLOOKUP( Step 2: Next, point to the target by pressing Cell C3 should look like this: =VLOOKUP(E3 twice. Step 3: Type a comma, to separate the target from the table. Step 4: Move the cursor to cell AA3, one corner of the table. Step 5: Select the table by Shift as you move the cursor. Step 6: When the entire table is selected, press F4 to lock the table s location in an absolute address. Cell C3 should look like this: =VLOOKUP(E3,$AA$3:$AC$100 Step 7: Type a comma, to separate the table from the column number. Step 8: Type the table. 2, because City is the second column in Step 9: Close the expression with a Enter. ) and press

PAGE 110 CHAPTER 13: VLOOKUP() WAYNE THOMAS SPIES The results will be: 1 CUSTOMER TABLE 2 Last First City State ZIP 3 Smith Sue Amityville 11701 4 To test this, move to cell E3. Type 11702 and press Enter. Cell C3 should automatically update, displaying Oak Beach. When a lookup target does not appear in the Lookup Table, Excel, by default, returns the value of the last one that does. You can solve this problem with the following: A B D E 1 Enter a number: 1,234 2 two 2 4 four 3 You entered a number outside the range 6 six 4 8 eight 5 9 a number outside the range ="You entered " & VLOOKUP(B1,$D$1:$E$5),2) MISSING ELEMENTS Let s take a closer look at how the VLOOKUP() function works. Set up the following worksheet, where the range D1:E4 is the Lookup Table: A B D E 1 Enter a number: 2 2 two 2 4 four 3 You entered two 6 six 4 8 eight Enter: ="You entered " & VLOOKUP(B1,$D$1:$E$4),2) in cell B2, and cell A3 will report: 2 You entered two sacrificing grammar for brevity. Enter: in cell B2, and cell A3 will report: OUT OF RANGE So far, so good. Now enter: and cell A3 will report: 4 You entered four 1,234 You entered eight Now when you enter: cell A3 will report: 1,234 You entered a number outside the range MISSING NUMBERS That solves the problem with numbers that are out of range. But what about numbers that are missing? Enter: and cell A3 will report: 5 You entered four One solution is to enter a value for the missing numbers: A B D E 1 Enter a number: 5 2 two 2 3 an invalid #. 3 You entered an invalid #. 4 four 4 5 an invalid #. 5 6 six 6 7 an invalid #. 7 8 eight 8 9 Now when you enter: cell A3 will report: 5 You entered an invalid #. a number outside the range ="You entered " & VLOOKUP(B1,$D$1:$E$8),2)

WAYNE THOMAS SPIES MICROSOFT EXCEL: COMPLETE PAGE 111 This works well if you have just a few missing numbers. Also, you can customize the message so it is very clear whether the number is below the range, above the range, or simply missing. PARAMETER SOLUTION If you can live without these customized messages, Excel provides an additional tool for dealing with missing numbers. Simply add the False parameter to the end of the VLOOKUP() complement as shown here: A B D E 1 Enter a number: 3 2 two 2 4 four 3 #NA 6 six 4 8 eight ="You entered " & VLOOKUP(B1,$D$1:$E$4),2,False) Now enter any missing number, and cell A3 will return: #NA Adding the False parameter to the end forces the VLOOKUP() function to return only exact matches. Now, at this point, you may throw your hands in the air, and wonder why it didn t work like this in the first place. Later, though, you will see that finding only exact matches is not always what we want. NOTES

PAGE 112 CHAPTER 13: VLOOKUP() WAYNE THOMAS SPIES

LAB 6: USING VLOOKUP() You have seen several examples of how VLOOKUP() can be used to look up information, just as you might look up a number in a phone book. While that s helpful, the VLOOKUP() function is particularly useful when we need to calculate marginal rates. DATES COMMENT We would like to enter a date in cell A2, and then display the day of the week in cell B2: A B C D 1 Date Day of Week 2 10/11/2020??? 3 WEEKDAY() The WEEKDAY() function takes a date, and then returns 1 if that date is a Sunday, 2 if it s a Monday, 3 if it s a Tuesday, and so on. SOLUTION We can use the WEEKDAY() function in conjunction with a VLOOKUP() table of numbers and their corresponding days. Step 1: Create a Lookup Table, as in AA2:AB8, below. A B AA AB 1 Date Day of Week Number Name 2 10/11/2020??? 1 Sunday 3 2 Monday 4 What formula 3 Tuesday 5 goes here? 4 Wednesday 6 5 Thursday 7 This is the lookup 6 Friday 8 table. 7 Saturday INCOME TAX Calculating income tax is hard to do without tax tables. We can use Excel s VLOOKUP() function to automate this process of calculating marginal rates. SETUP The tax laws change from time to time, but the basic concept of the progressive income tax has been with us for some time. In a progressive income tax the tax rate increases with income. In other words, the first $1,000 of taxable income that you make carries with it a low rate. The rate that you pay on the last dollar earned is called the marginal rate: the rate on one additional dollar. Our tax table has five notches. On income between 0 and $1,800, you pay a marginal rate of 11%. If you make more than $1,800, you pay 11% on the first $1,800, plus 15% on the balance, up to $16,800 SOLUTION Step 1: Set up the following table, using a dummy value of 54,002 for our taxable income (that is, our total income less various deductions and exemptions). 3 4 : 0 0 11% 5 Excess : 1,800 15% 6 : 16,800 28% 7 : 27,000 35% 8 Total : 54,000 38% Now, what formula goes in cell B2? Step 2: In cell B2, enter this formula: =VLOOKUP(WEEKDAY(A,2),$AA$2:$AB$8,2) Step 2: The concept of a progressive tax means that you pay the base rate plus the marginal rate time the income over the base amount. Thus the on a 0

PAGE 114 LAB 6: USING VLOOKUP() WAYNE THOMAS SPIES income is 0. For each notch, the base tax increases as shown. Enter: =D4+E4+(C5-C4) in cell D5, and copy it down through cell D8. 3 4 : 0 0 11% 5 Excess : 1,800 198 15% 6 : 16,800 2,448 28% 7 =D4+E4*(C5-C4) : 27,000 5,304 35% 8 Total : 54,000 14,754 38% Step 5: The so-called Excess is the able less the. In cell B5, enter: =B2-B3 3 : 54,000 4 : 14,754 0 0 11% 5 Excess : 2 1,800 198 15% 6 : 16,800 2,448 28% 7 : 27,000 5,304 35% 8 Total : 54,000 14,754 38% =B2-B3 Step 3: In cell B3, enter the formula to determine the : 3 : 54,000 4 : 0 0 11% 5 Excess : 1,800 198 15% 6 : 16,800 2,448 28% 7 : 27,000 5,304 35% 8 Total : 54,000 14,754 38% =VLOOKUP(B2,$C$4:$E$8,1) Step 4: Find the, the tax on the : 3 : 54,000 4 : 14,754 0 0 11% 5 Excess : 1,800 198 15% 6 : 16,800 2,448 28% 7 : 27,000 5,304 35% 8 Total : 54,000 14,754 38% Step 6: The can be looked up in the Table; In cell B6, enter: =VLOOKUP(B2,$C$4:$E$8,3) 3 : 54,000 4 : 14,754 0 0 11% 5 Excess : 2 1,800 198 15% 6 : 38% 16,800 2,448 28% 7 : 27,000 5,304 35% 8 Total : 54,000 14,754 38% =VLOOKUP(B2,$C$4:$E$8,3) Step 7: The is the times the Excess. In cell B7 enter: =B6*B5 =VLOOKUP(B2,$C$4:$E$8,2)

WAYNE THOMAS SPIES MICROSOFT EXCEL: COMPLETE PAGE 115 3 : 54,000 4 : 14,754 0 0 11% 5 Excess : 2 1,800 198 15% 6 : 38% 16,800 2,448 28% 7 : 0.72 27,000 5,304 35% 8 Total : 54,000 14,754 38% Step 8: Finally, the Total is the plus the. In cell B8 enter: =B4+B7 3 : 54,000 4 : 14,754 0 0 11% 5 Excess : 2 1,800 198 15% 6 : 38% 16,800 2,448 28% 7 : 0.72 27,000 5,304 35% 8 Total : 14,754.72 54,000 14,754 38% MARGINAL COMMISSIONS COMMENT =B6*B5 =B4+B7 In many businesses, the sales staff is paid according to a bracket commission scheme. With marginal commissions, the commission rate depends on the amount of sales. There are two ways of determining bracket commissions. The more simple approach works like this: the commission rate depends on total sales. The higher the total sales, the higher the rate. For example, on sales up to $10,000, the sales person gets paid 10 percent. If the sales total between $10,000 and 20,000, the overall commission rate jumps to 12 percent, and if the total sales are more than $20,000, the rate is 14 percent. To illustrate this, consider the following worksheet, which illustrates the situation on the penultimate sales day of the month: A B C AA AB 1 Person Sales Sales 2 Allan 8,000 $800.00 0 10.0% 3 Sue 10,001 1,200.12 10,000 12.0% 4 Bob 19,999 2,399.88 20,000 14.0% 5 Karen 20,001 2,800.14 =VLOOKUP(B5,$AA$2:$AB$4,2)*B5 This is the Look-Up Table. This approach is easy to understand. Just multiply your total sales times the rate for that level, and you have the answer. That s what the formula does: For Allan, it looks up the value of cell B2 8,000- in the Lookup Table. Because 8,000 falls between 0 and the next value, the VLOOKUP() function returns the value of column 2 for 0, or 10%. It then multiplies this rate times the value of cell B2, and returns $800.00. For Karen, it looks up the value of cell B5 20,001 in the Lookup Table. Because 20,001 is greater than 20,000, the VLOOKUP() function returns the value of column 2 for 20,000, or 14% It then multiplies this rate times the value of cell B5, and returns $2,800.14. Although this commission scheme is easy to calculate and easy to understand, it is rarely used, because it produces perverse incentives in real life. For example, look at Bob. If he could sell just $1 more what s in it for him? About $400! Bob will do almost anything for that last sale. Unfortunately, not all sales are good sales. He might sell to someone who is not credit worthy. He might sell to someone who he knows will return the product the very next day. He may make exaggerated claims, or in other ways misrepresent the product, to get that next sale. He may even juggle the books to push sales from one period into another. And what about Allan? What s another $100 sale worth to him? Ten percent. $10. Not much. Now, look at the company. On sales of $58,001, it will pay commissions of $7,200.14. With one more day of sales this month, Allan has very little incentive $10, Sue has some $12, Karen has more $14, but Bob has a huge incentive $413.98 to make one more $100 sale. There is a better, albeit more complicated, approach. Instead of basing the rate on total sales, we can base it on

PAGE 116 LAB 6: USING VLOOKUP() WAYNE THOMAS SPIES marginal sales. A commission based on marginal sales rewards the next sale just a little bit more than the previous one, so that there is always more incentive but not a huge incentive to make one more sale. SOLUTION Step 1: Set up the following Lookup Table: The formula in cells AC2 through AC7 is not intuitive; you have to study it carefully. It works like this: if you sell nothing, you get your base commission which is 0. If you sell $100, you will get your base commission 0 plus the marginal commission 100*9.0% or $9.00. If your sales are exactly 4,000, you get the base commission 0 plus the sales above the base 4,000-0 or 4,000 times the marginal rate 4,000*9.0%, or $360. As you can see in our table, that figure becomes the base rate for sales of at least $4,000. If your sales are 4,200, you get the base commission $360 plus the sales above the base sales 4,200-4,000 or 200 times the marginal rate. Algebraically, this is $360 + (4,200-4,000)*10.5% or $381. AA AB AC AD 1 Level Sales 2 Level A 0 0 9.0% 3 Level B 4,000 360 10.5% 4 Level C 8,000 780 12.0% 5 Level D 12,000 1,260 13.5% 6 Level E 16,000 1,800 15.0% 7 Level F 20,000 2,400 16.5% =AC6+(AD6*(AB7-AB6)) Step 2: Now we must create a pay-out table, as follows: 1 Person Sales 2 Allan 8,000 3 Sue 10,001 4 Bob 19,999 5 Karen 20,001 Total Step 3: For the commission, we use this formula: =VLOOKUP(B2,AB2:AD7,2) 1 Person Sales 2 Allan 8,000 780 3 Sue 10,001 780 4 Bob 19,999 1,800 5 Karen 20,001 2,400 =VLOOKUP(B2,AB2:AD7,2) Total Step 4: The is the marginal commission rate, times (Sales - Sales): =VLOOKUP(B1,$AB$2:$AD$7,3)* (B1-VLOOKUP(B1,$AB$2:$AD$7,1)) 1 Person Sales 2 Allan 8,000 780 0 3 Sue 10,001 780 240.12 4 Bob 19,999 1,800 599.85 5 Karen 20,001 2,400 0.17 =VLOOKUP(B5,$AB$2:$AD$7,3)* (B5-VLOOKUP(B5,$AB$2:$AD$7,1)) Step 5: Finally, the Total is simply: Total

WAYNE THOMAS SPIES MICROSOFT EXCEL: COMPLETE PAGE 117 1 Person Sales Total 2 Allan 8,000 780 0 780.00 3 Sue 10,001 780 240.12 1,020.12 4 Bob 19,999 1,800 599.85 2,399.85 5 Karen 20,001 2,400 0.17 2,400.17 =C5+D5 Now let s examine the new structure. Consider the effects of the incentive on a new $100 sale: Person Old Old Incentive New New Incentive Allan 800.00 10.00 780.00 12.00 Sue 1,200.12 12.00 1,020.12 12.00 Bob 2,399.88 413.98 2,399.85 16.49 Karen 2,800.14 14.00 2,400.17 16.50 Now, don t be mislead by the fact that one person makes more or less in one scheme than the other. We can always tinker with the rates to achieve equity. But two points should be clear: By using the marginal rate approach, the incentives to sell one more increase steadily with sales, which is equitable and a good motivator. There are no large incentives to cheat the more you sell, the more you make. NOTES