MyConsultingCoach

Problem Solving Test

Word Problems

© Copyright MyConsultingCoach
1

Copyright: My Consulting Coach, all rights reserved.

WARNING: THIS DOCUMENT IS TRACKED

Please do not share via email or via any file hosting service (e.g. Dropbox, Google Drive)

This document tracks date, time, location and ISP each time it is opened or printed. In case we find
any suspect behaviour we are ready to take legal actions to ensure protection of our copyrights.
2

Instructions

MyConsultingCoach Problem Solving Test

Practice Test Overview and Instructions
This practice test has been developed to provide a sample of the actual McKinsey Problem
Solving Test used for selection purposes. This test assesses your ability to solve
business problems using deductive, inductive, and quantitative reasoning. As the official
test, this practice case contains a total of 26 questions and should be completed in
60 minutes.

Similar to the real test, this test contains an answer sheet at the end. Make sure to allocate
enough time to transfer all your answers to the answer sheet. The answer sheet will be the
only document used to assess your performance, any answer present in the booklet but not
in the answer sheet will not contribute to your final score.

While completing this practice test, do not use any electronic devices (e.g., calculator,
computer) when performing calculations to answer the questions. Electronic devices will
not be permitted to be used during the actual test administration. Also, during the actual
test administration, you may use all blank space in the test booklet as scratch paper to
assist you in performing any calculations and recording any notes. No scratch paper will
be allowed.

The practice scenarios begin on the next page of this booklet. Only consider information
contained within the scenario when determining your answer. Considering all information
presented within the scenario is critical to answering questions correctly.

After you have completed the test, score your answers using the solutions located at the
end of this booklet and identify your areas of strength and weakness with our performance
radar.
3

Word problems
Safta is considering investing in a new project which could dramatically
increase the efficiency of a platform. A new drilling scheme is proposed. Its
initial cost is USD 500m plus USD 80m a year for maintenance. The average increase
in output is expected to be 2 million oil barrels a year.

1. If the target profit is USD 200m in 10 years, and there is an initial

subsidy of 100m USD, what should the average barrel price over
the 10-year period be?
A. 50 USD
B. 60 USD
C. 70 USD
D. 80 USD

Sada is concerned about its decreasing profit margin. Currently, the bag
EauRouge is sold with a 15% profit margin. A marketing campaign increases
EauRouge revenue by 20% with a 5% increase on costs.

2. What is the new profit margin?

A. 20%
B. 26%
C. 32%
D. 40%
4

CAME has a big logistics centre in the suburbs of Castle Saint John. It
ships around 100,000 bottles of beer per working day using small trucks and vans.
Each small truck has a capacity of 4,000 bottles and it takes on average 12 hours for
the truck to complete a delivery (from the moment it leaves to the moment it comes
back). The company has 10 small trucks. The rest of the beers are transported using
vans (capacity: 1,000 bottles), which also take 12 hours for a delivery.

3. If the cost of running a truck is 50 USD per hour and the cost of
running a van is 30 USD per hour, how much does CAME spend to
ship 100,000 beers?
A. 15,000 USD
B. 18,300 USD
C. 18,500 USD
D. 19,200 USD
5

Linx supercars is planning to increase ancillary revenue. The table below

shows a list of the most profitable revenue streams in optional accessories and after
sales services.

Additional revenue for each vehicle type (mn)

Vehicle type Compact MPV Sedan
Accessories
iPod/Aux in 44 53 62

Cruise control 12 32 58

Alloys 32 56 51

Parking sensors 44 109 73

After sales services

Spare parts 342 532 854
Regular 243 423 523
maintenance
Repairs 123 284 142

Linx is expecting Sedan sales to increase by 3% a year over the next three years.

4. Assuming that the revenue of spare parts sold is proportional to

the number of vehicle sold, how many spare parts for Sedan will
Linx sell after three years if the average price for one single spare
is 100 USD?
A. 700,000
B. 8,400,000
C. 9,300,000
D. 12,000,000
6

UNO recently received a donation of £100k. Part of it was for an education

project and £34k needed to be spent on another very important project in health. The
CEO wants to ask the foundation which made the donation to cover both projects. The
institution, however, still wants ¾th of their donation on Education.

5. What is the minimum additional donation (in k£) which would

allow UNO to cover both projects while maintaining the ¾ quota?
A. 20
B. 25
C. 34
D. 36
7

Raffi is a transnational food and beverage company. It is the largest food

company in the world measured by revenue. Its products include baby food, bottled
water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream,
frozen food, pet foods, and snacks.
Raffi often develops new products for the market. The profit is usually very high
but it has to through quite a few tests before it is ready for the market. In the first
test, the product has 50% probability of being discarded. The second test is made of
two alternate trials and the product can move through either of the two with equal
probabilities. The two trials have a probability of passing of 38% and 40%
respectively. In the third test the probability the product is rejected is 30%.

6. Assuming Raffi invests 120m in the product, which of the

following is closest to the expected revenue that the product has to
generate to justify the investment?
A. $440m
B. $480m
C. $750m
D. $875m
8

Talla’ is trying to estimate how long it takes for the app to become viral.
The marketing team notices that for the first three days since the launch in Rogazia,
the number of customers increased by 250 per hour. The team introduced a feature
to invite friends on the fourth day, post which a customer invited 10 friends on an
average, of which 20% became customers every hour. The invitations are sent out by

7. How many customers did the Talla’ app have at 2 AM on the

fourth day?
A. 54,000
B. 72,000
C. 144,000
D. 126,000
9

TERAF is looking at expanding its customer base. It first conducted a market

research on different age groups.

Characteristics/age group 18- 26- 35- 44- 54-

25 34 43 53 65
(A) (B) (C) (D) (E)
Percentage of Total Population 13% 12% 18% 14% 25%
Time spent watching TV (hours/ 12 9 14 20 29
week)
Percentage time spent in the 23% 12% 34% 43% 72%
evening
Time spent watching broadcasted 92% 91% 72% 43% 31%
events (% of total)
Time spent watching films 4% 5% 8% 15% 19%
(% of total)

The total population is 60 million people.

8. Assuming that A and B only watch films and broadcasted events,

with the remaining time spent on watching ads, approximately
how many hours of ads are watched in total by A and B in a year?
A. 120 m hours
B. 200 m hours
C. 280 m hours
D. 330 m hours
10

Cixa, a leading multiplex theatre for performing arts has just completed
renovation works to boost capacity. The following information has been
gathered:
Average ticket revenue share is 25% (75% goes to artist)
Average ticket price is $12
There are 550 seats in the theatre
Performances are shown 4 times a day
For each ticket sold, Cixa also generates an additional $4 contribution
margin on average on snacks and drinks
Rent cost is 100.000$ per month
Taxing scheme on artistic performance requires a 5,000$ fixed monthly tax
and a tax of 33% of revenues on the theatre ticket price
Cixa operates 30 days/month

9. Based on the information above, which of the following is closest

to the minimum level of seat occupancy needed by Cixa to break
even on operations?
A. Full capacity
B. 68%
C. 52%
D. 25%
11

Testar is a leading construction company. The management of Testar is

estimating the optimal bidding strategy for two High-rise projects in Turkey. Their
expected bid is $240 million. Testar expected profit margin will be 20%.

10. If Testar profit margin is 50% higher their main competitors’ prof-
it margins, what would be approximately the bid value that would
maximize profit and ensure the awarding of the contract?
A. $192 million
B. $205 million
C. $222 million
D. $302 million
12

Solutions
1 C
We have the income and cost information, and can solve for price using the concept:
Revenue - Cost = Profit

Revenue = 100 + 2 * price * 10

Cost = 500 + 10 * 80

Profit = 200

Solve to find price = 70

2 B

Pmargin = ( R — C)/R

C = R * (1 — Pmargin)

New revenue = 1.2 * R

New cost= 1.05*R*(1- Pmargin)

Hence new profit margin = 1 — 1.05 * (1- Pmargin)/1.2 = 25.625%

13

3 D

The total number of beer trucks can carry in 24 hours is 80,000. Vans have to carry
the other 20,000, which means that the company needs 10 vans (each can carry
1,000 beers twice in 24 hours). Since there are 10 vans and 10 trucks, 10*24*
(50+30) =19,200 USD

4 C

Total revenue will be 854*1.03^3=933m, after 3 years.

This is simply divided by 100 to find the number of spare parts.
5 D

Let’s assume that the future donation is x.

Hence x - (0.75x+34) > 0 so x > 136.

Additional donation = 36.

6 D

Probabilities of passing each stage are 50%, 38% or 40% and 70% respectively.

Thus, the probability of the product going through is:

P = 0.5*(0.38+0.4)/2*0.7 = 0.1365.

With R being expected revenue, to match the investment,

R*0.1365=120 and R=880m.

7 D

Total customers in the first three days (or at 00:00 on day 4): 250*24*3= 18,000

New customers added at 1 AM on day 4: 18,000*10*20% = 36,000

New customers added at 2 AM on day 4: 36,000*10*20% = 72,000

14

8 D

The percentage of ads watched by A and B is 4% respectively. This means that

customers in the age group A on average watch 0.48 hours and those in the age
group B watch 0.36 hours a week. A has 7.8m and B has 7.2m customers. By
multiplying the hours per week by 52 (weeks in a year) and by the number of
customers, customers in group A will have watched 194 m hours while customers in
group B watch 134 m hours. Total = 330m.

9 D

First, establish the number of customers (X) required to break even, such that:

Revenues = Fixed costs + Variable costs

(0.25 * 12 * (1-0.33) + 4) * X = 100,000 + 5,000

[Tax computed on theatre ticket price, and % share with artists on the average ticket
revenue]

6 * X = 105,000

X = 17,500

Second, calculate total capacity: 4 * 30 * 550 = 66,000

Then, compute the ratio: 17,500/66,000 = 26%

10 C

Understand competitors' profit margin: 20%/1.5 = ~13.33%

An optimal bidding strategy ensuring the awarding of the contract would imply
bidding marginally less than the minimum amount competitors would bid to be
profit makers, thereby, at their cost. Therefore the optimum bid is at:

240*(1-(0.2-0.13)) = ~224 hence 222 is a reasonable minimum bid