McKinsey Problem Solving Test

Practice Test #3

igotanoffer.com

McKinsey PST #3

Copyright © 2017 IGotAnOffer Ltd.

How to make the most of this practice test
We have designed our tests to resemble the official McKinsey PST as closely as possible. The layout of this
test follows exactly the one offered by McKinsey. Here are a few tips to use this test as efficiently as
possible:

1. Print out the test in A4 format, double-sided. Remember, when you are sitting in front of the
actual McKinsey PST, you will not be allowed to use scrap paper or a calculator. So you should get
used to writing down your calculations in the margins of the question pages. If you only use the
pdf document on a screen, you will not experience the real test conditions.

2. Do the whole test under real time conditions: you have 60 minutes to complete it. At the
end of the 60 minutes, put your pen down, even if no one is there to ask you to. The reason this is
important is that you need to track your progress across different sample tests. If you manage to
score above 70% in more than 60 minutes, this gives you no indication of how well you will do on
the actual test, and might give you a false sense of confidence.

3. Check your answer sheet against the answer key. Whether you had time to finish all the
questions or not, check whether the ones you did answer were correct. Then make a note of your
score. Your objective is to improve your score compared to the last sample test you tried. In fact,
it is likely that your score in the first test you solve will be well below the passing score of 70%.
This is completely normal, as you are still learning about the format of the test, and how to use
your answering method within the time allocated. If you stick to the method, and review your
answers carefully, you should see a quick improvement in your score.

4. Review the solutions in the answer key carefully, and compare them with your notes, to see
why you didn’t approach the question correctly in the first place. A careful review requires that
you go through the steps given in the solution, pencil in hand, and re-do all the steps that aren’t
obvious to you. This will take some time, but will prove invaluable to your progress.

5. Print a clean version and do the test again. Once you are comfortable with all the answers, you
can move on to the next sample test. After going through all the available practice tests, you
should return to the ones you have already done, and make sure that you can now solve them
easily within the allocated time. When you do so, print a new copy of the test, so that you don’t
get distracted by your previous notes, and feel like you are under real test conditions.

Finally, we are here to answer any of your questions, so if you get stuck trying to understand the
explanations in the answer key, just drop us a line at: support@igotanoffer.com. We’ll be happy to fill any
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Instructions

This practice test contains 26 questions and we recommend you take 60 minutes to
complete it. This test assesses your ability to solve business problems using deductive,
inductive and quantitative reasoning.

While completing this practice test do NOT use any electronic devices such as a calculator
or computer when performing the calculations to answer the questions. Electronic devices
will NOT be permitted during the actual test administration.

We also recommend you only use the blank space in this booklet to assist you in
performing any calculations and recording any notes. Indeed, NO scratch paper will be
allowed during the actual test administration.

You will be presented with a scenario based on a real business case. Information related to
each scenario will be shown in text, tables and exhibits. This information is presented in
shaded areas and is distributed in sections throughout the scenario. The questions ask you
to find the most appropriate answer to the problem as described using only the
information presented. You should select one and only one answer to each question.

This practice test begins on page 5 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 completing the test, score your answers using the answer key located at the end of
this booklet. Add the number of correct answers to determine your final score.

Copyright © 2017 IGotAnOffer Ltd. 3

Answer sheet
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Q24 A B C D
Q25 A B C D
Q26 A B C D

Copyright © 2017 IGotAnOffer Ltd. 4

Milky Choc


Milky Choc is a confectionery business based in the UK. It is a conglomerate of numerous well-
known global brands offering products such as chocolate bars, chocolate-coated nuts, sweets and
chewing gum.

The products sold by Milky Choc are well-established and have a very loyal customer base.
However, the increasing awareness among consumers of the health problems related to over-
consumption of sugar has slowed down the sales and therefore the profits growth of Milky Choc.

The CEO tells you that she believes she can retain customers by offering healthier products with
lower sugar and fat content but is concerned that the demand for these items might be too low to
justify the development costs. She wants your team to investigate whether existing and new
customers would be interested in these new products.

The marketing team provides you with some consumer data to illustrate the perceived decline in
consumption among different types of consumers.

Exhibit 1 shows the average total consumption of Milky Choc products per person (in GBP) in the
first six months of 2013 and the first six months of 2014. Consumers are grouped in quintiles
based on frequency of consumption.

Exhibit 1
Average total consumption of Milky Choc products (GBP) per person

Quin0le 5 88
76

Quin0le 4 69
51

Quin0le 3 47 2013
29
2014
Quin0le 2 53
43

Quin0le 1 42
33

0 20 40 60 80 100

Copyright © 2017 IGotAnOffer Ltd. 5

1. Which of the following statements BEST describes the thoughts of Milky Choc’s CEO?

A) She is worried that Milky Choc’s profits are hindered by high development costs

B) She believes Milky Choc can become better at adapting its offer to changing consumer trends

C) She believes Milky Choc can become better at identifying trends in consumer behaviour

D) She is worried that Milky Choc’s profits could be hindered by launching a product facing
insufficient demand

2. Which of the following statements CANNOT be concluded from the information presented in
Exhibit 1?

A) The average consumption across quintiles in the first six months of 2013 was £60 per
person across all products

B) Customers in quintile 3 are the ones with the highest proportional decrease in consumption
across all products

C) The average decrease in consumption between the first six months of 2013 and the first six
months of 2014 was more than 20%

D) Customers in quintile 5 were the ones with the highest average spend per product in the
first six months of 2013

3. What is the correct ranking of the five quintiles in Exhibit 1 according to the percentage
decrease in consumption between the first six months of 2013 and the first six months of 2014,
from the largest to the smallest decrease?

A) 3, 1, 2, 4, 5

B) 3, 4, 1, 5, 2

C) 3, 4, 1, 2, 5

D) 3, 1, 4, 2, 5

4. If consumption of quintiles 1 and 2 had decreased by 20% between the first six months of 2013
and the first six months of 2014, and quintiles 3, 4 and 5 had increased by 30% over the same
period, what would be the total spent across quintiles in the first six months of 2014?

A) £311

B) £341

C) £371

D) £401

Copyright © 2017 IGotAnOffer Ltd. 6


The team decides to design a survey to evaluate the demand for healthier alternatives. A sample of
50,000 customers were surveyed and divided into customers who have consumed Milky Choc
products in the last year (existing customers) and customers who have never tried Milky Choc
products (new customers).

Customers were asked to try two different products and rate them on a scale from 1 to 5 (5 being
the highest) on the following criteria:

• Texture
• Taste
• Appearance
• Packaging and format

Exhibit 2 below presents the results of this survey.

Exhibit 2
Percentage of customers’ responses by rating and criterion

Existing customers New customers

N 20,000 30,000

25% 30% 30% 30%

15% 10% 20% 20%
Texture 10% 10%

1 2 3 4 5 1 2 3 4 5

40% 40%
30%
20% 20% 15%
Taste 10% 10% 5% 10%

1 2 3 4 5 1 2 3 4 5

35%
30% 30%
25%
20%
Appearance 10%
15%
10%
15%
10%

1 2 3 4 5 1 2 3 4 5

40%
35%
26%
Packaging 16% 18% 20%
10% 13% 12% 10%
and format

1 2 3 4 5 1 2 3 4 5

Copyright © 2017 IGotAnOffer Ltd. 7

5. Which of the following conclusions is INCORRECT based on the information presented in
Exhibit 2?

A) New customers generally liked the texture of the new product more than existing customers
did

B) Existing customers generally gave more 1-ratings than new customers did

C) Packaging is the criterion which received the most ratings of 3 and above for existing
customers

D) Existing customers generally disliked the taste of the new product more than new
customers did

6. If the number of new customers surveyed was equal to three times the number of existing
customers surveyed in Exhibit 2, and the percentage of responses was as shown in Exhibit 2,
how many more new customers would have given a rating of 4 on the appearance criterion than
existing customers?

A) 4,000

B) 4,500

C) 5,000

D) 5,500

7. When comparing existing customers to new customers, which of the following pieces of
information CAN be determined based on the information provided in Exhibit 2?

A) The percentage difference in total number of customers who would give a rating above 3 to
the taste of the new product once launched

B) The percentage difference in customers surveyed whose average rating was above 3 across
the four criteria

C) The number of percentage points difference between customers surveyed who gave a 3-
rating to the taste of the new product

D) The absolute difference in number of customers who gave the product’s texture a rating
above 3 between customers who have tried the new product and customers who have not

8. Which of the following additional pieces of information would be LEAST useful for you to
determine whether the new product is likely to generate high demand?

A) The willingness-to-pay of existing and new customers for this type of healthy products

B) The breakdown of the data for existing customers in Exhibit 2 into groups sorted by average
yearly consumption

C) The number of customers in the confectionery market who have consumed less
confectionery in the last year than in the previous year

D) The existing offering of competitors in this category of products

Copyright © 2017 IGotAnOffer Ltd. 8


The CEO tells you that she is concerned that the differences between new and existing customers
will not be representative because the two samples have different sizes. As a result, the CEO wants
your team to run the survey again on two new samples of existing and new customers of the same
size.

One of the data analysts in her team suggests that it would be more cost effective to simply run the
survey on another set of 10,000 existing customers and combine their responses with the existing
sample of existing customers. He also explains that representativeness in this context means that
the results obtained from the samples in the survey can be safely extrapolated to the larger
population of consumers. The smaller the sample surveyed, the more likely it is that the results will
be distorted by outliers (i.e. respondents who gave extreme answers), and therefore not be
representative.


9. Which of the following would BEST describe the thoughts of the data analyst?

A) The data analyst believes that the CEO is wrong in saying that the difference in sample sizes
can affect the representativeness of the survey, since all what matters for
representativeness is the size of the sample

B) The data analyst believes that the company has already spent too much on a survey that did
not produce representative results because one of the samples was smaller than the other,
and that surveying an additional sample of new customers would be a waste of money

C) The data analyst believes that increasing the size of the sample of existing customers to
30,000 will be as representative, and cheaper than running a survey on two new samples,
since the issue is only about the two samples having different sizes

D) The data analyst believes that sending the survey to an extra 10,000 existing customers
would give more representative results and be more cost effective than running two
separate new surveys

Copyright © 2017 IGotAnOffer Ltd. 9

Paul Bakery


Paul Bakery is a mid-sized family bakery based in Paris. It was open in 1951 by Mr Paul and the
family bakery has been passed on from father to son since. It is located in Paris’s 1st
arrondissement, a central district comprising a mix of businesses and family apartments. The
bakery enjoys a very strong reputation among the local population. It is well known for the quality
of its products and the care with which they are prepared.

The bakery offers a large number of products that can be split into three broad categories:

• Bread: bread is an important component of the French population’s diet and is part of most
meals. In addition, French families tend to buy their bread at local bakeries rather than at
regular grocery shops. Paul Bakery sells a large number of baguettes every day and enjoys a
strong profit margin in this product category because it only requires very basic ingredients
and is produced in large quantities.

• Sandwiches: Paul Bakery also sells freshly prepared sandwiches at lunchtime. Customers
who usually purchase these items are professionals who work in the local area and come to
the bakery around midday to buy lunch. Lunch options in the neighbourhood are scarce and
the bakery therefore has strong pricing power and profit margins in this product category.

• Cakes: A few years ago the bakery also started selling cakes, after customers started
expressing a need for this type of products. Sales of cakes are very volatile. They tend to be
low most of the year, when customers only occasionally buy cakes to celebrate special
occasions, but to be extremely high during certain periods of the year such as Christmas and
Easter when it is customary to buy cakes for family dinners. Cakes are sold at higher prices
than other items. However, the bakery enjoys a lower profit margin for this type of product,
mainly because of the volatility of the demand for cakes.

The owner of Paul Bakery has noticed that his revenues were increasing in December but that his
profit margin was falling significantly during this month compared to the previous two months.
He has tried to understand why this was the case, but has not found a convincing answer. As a
family friend, he has asked for your help to address this issue and has provided you with a
summary of the bakery’s financials (Table 1).

Table 1: Key Financial data for Paul Bakery (average per month)

October - November December

Revenue €37,323 €38,543
Costs €32,111 €35,666
Number of items sold 19,890 19,302
Profit margin 14.0% 7.5%

Copyright © 2017 IGotAnOffer Ltd. 10

10. Which of the following statements, if true, would BEST explain why the revenues and profit
margins in December and in October - November are different?

A) There is a greater proportion of cakes sold in December than during the previous two
months

B) There is a greater number of temporary staff hired in December than in the previous two
months

C) There is a greater proportion of bread sold in December compared to the previous two
months

D) Surrounding bakeries are closed in December

11. What is the absolute difference between the average profits made in October – November and
the profits made in December?

A) €1,947

B) €2,123

C) €2,334

D) €2,566

12. Which of the following statements is a valid conclusion, based on the information provided in
Table 1?

A) Revenues were 6% higher in December than in the average of the previous two months

B) Costs grew by 18% between December and the average of the previous two months

C) Costs increased more than two times faster than revenue between December and the
previous two months

D) The bakery sold a total of 59,000 items between October and December

13. Which of the following statements is most accurate regarding the data in Table 1?

A) The bakery made approximately 40% less profits per items sold in December versus the
average of October and November

B) The bakery made approximately 20% less profits per items sold in December versus the
average of October and November

C) The bakery made approximately 40% more profits per items sold in December versus the
average of October and November

D) The bakery made approximately 20% more profits per items sold in December versus the
average of October and November

Copyright © 2017 IGotAnOffer Ltd. 11


After looking into the bakery’s financials, you decide to further investigate the cake segment of the
business. The owner tells you that during October and November one of his bakers spends 50% of
his time baking cakes, but that he employs two temporary extra junior bakers in December to help
produce the necessary number of cakes during the Christmas season. In December, 2.5 full time
bakers therefore focus on baking cakes.

The owner provides you with Table 2, which summarises the number of items produced by the
bakery between October and December. He also gives you Exhibit 1, which illustrates the number
of cakes the bakery can produce depending on the number of bakers it employs. Finally, he tells
you that a full time baker works 160 hours per month. The owner also tells you that all items
produced are sold.

Table 2: Key production data for Paul bakery (average # of items per month)
October - November December

Pieces of bread 14,923 15,010

Cakes 65 304
Sandwiches 4,902 3,988

Exhibit 1
Number of bakers full time equivalent dedicated to cake production
3.5

2.5

1.5

0.5

0
0 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400
Number of cakes per month



14. What is the approximate difference in the bakers’ productivity, measured in minutes to bake a
cake, in December versus the average of the previous two months?

A) 1 minute

B) 5 minutes

C) 9 minutes

D) 13 minutes

Copyright © 2017 IGotAnOffer Ltd. 12


15. Which of the following ideas would LEAST help to address the decrease in efficiency in baking
cakes between December and the previous two months according to Exhibit 1?

A) Produce an extra 50 cakes per month and sell them through a nearby grocery shop in
December

B) Hire a total of 3 extra bakers in December, and produce an extra 75 cakes per month to sell
them through a nearby grocery shop in December

C) Hire only 1.5 extra bakers in December and cut down production to 300 cakes per month

D) Hire only 1 extra baker in December and cut down production to 225 cakes per month

16. Which of the following statements, if true, would NOT explain the difference in sandwiches sold
between December and the previous two months?

A) Sandwiches are mainly purchased by office workers who tend to go on holidays during
December

B) The bakery produces 15% fewer sandwiches in December to adapt to the lower demand

C) Customers tend to buy more hot dishes than sandwiches during December because the
temperatures are lower than in October and November

D) The bakery has difficulties sourcing high quality ingredients for its sandwiches during
December


While discussing the decrease in productivity for cakes in December, the owner of the bakery
shows interest in producing more cakes in December and working with other grocery stores and
bakeries to sell the excess cake production. He thinks that only hiring one extra baker in
December would not be sufficient, and that producing more cakes or other products is the best
option to address the problem. As a result, he would like to know if the benefits of increasing cake
production outweigh the risks of selling his cakes through 3rd party outlets that also sell good
quality bread and sandwiches.


17. Which of the following questions best summarises the owner’s concerns?

A) Does it make sense to only hire one extra baker in December, or should the owner re-think
his hiring strategy?

B) Should the bakery sell extra cake production only to outlets that do not sell good quality
bread and sandwiches?

C) Should the bakery produce extra cakes or another type of product?

D) Would the gains in increased cake production productivity be more valuable than the lost
revenue from bread and sandwiches sales?

Copyright © 2017 IGotAnOffer Ltd. 13

Public Private Partnerships


Public Private Partnerships (PPP) are businesses or public service ventures developed jointly by
governments and private organisations, in order to fund large projects with public value. These
ventures typically include infrastructure projects such as roads, ports or bridges, water
infrastructure, healthcare services, telecommunication or energy equipment. The cost of the
project can be borne either by the end-user or by the government, in which case the private
partner acts mainly as an administrator of the venture.

The definition of PPPs can vary and it is generally recognised that Public Private Partnerships can
fall anywhere on a spectrum with full financing and administration by the government on one end
or full financing and administration by the private partners on the other.

The principal benefits of private sector involvement in public service provision through PPPs are:

• Providing additional capital
• Providing alternative management and implementation skills
• Providing better identification of needs and optimal use of resources

Your team has recently worked on several assignments to initiate, structure, or reorganise some
public private partnerships in various countries and has developed a strong experience in this
field as a result. The government of Indonesia has therefore decided to hire your team to evaluate
how public private partnerships could be used to help boost the country’s economic growth.

Exhibit 1 shows investments in public private partnerships by governments for 7 selected
countries and their GDP growth rate over the past 10 years.

Exhibit 1
Investment in PPP (USD billion) and GDP growth rate
10% 4% 5% 7% 4% 4% 4% GDP growth rate

70 95 52 160 47 20 50 Total
100%
90% Other projects
80%
70% Transport
60% infrastructure
50% Telecom
40% infrastructure
30% Energy
infrastructure
20%
10%
0%
China Brazil Russia India Mexico Pakistan Turkey

Copyright © 2017 IGotAnOffer Ltd. 14
18. Which of the following statements BEST describes the reason why your team has been hired by
the government of Indonesia?

A) Your team has been hired to investigate in which sectors the government of Indonesia
should develop Public Private Partnerships, because your team has better knowledge of
these sectors

B) Your team has been hired to help the government of Indonesia replicate Public Private
Partnership projects that have been successful in other countries, because it has detailed
knowledge of these projects

C) Your team has been hired to explain how Public Private Partnerships can support a
country’s economic growth because of its experience in dealing with this type of projects

D) Your team has been hired to explain how best to use Public Private Partnerships, because it
is the most knowledgeable team in this area

19. If total PPP investments in Mexico were to grow by 10% per year in the future, and if PPP
investments in transport projects in Mexico were to grow at 20% per year, which of the
following would be the MINIMUM number of years required for investment in transport
infrastructure to represent more than 40% of total PPP investments?

A) 2

B) 4

C) 6

D) 8

20. Which of the following statements can be concluded based on the information provided in
Exhibit 1?

A) 35% of total PPP investments in China and Brazil combined are in energy infrastructure

B) 5% of total PPP investments in China and Brazil combined are in telecom infrastructure

C) More than 40% of total PPP investments in China and Brazil combined are in transportation
infrastructure

D) More than 85% of total PPP investments in China and Brazil combined are in either telecom,
transport or energy infrastructure projects

21. Which of the following pieces of information would be LEAST helpful in better understanding
whether public private partnerships can be beneficial to the government of Indonesia?

A) A review of the government’s capacity to understand and analyse how to efficiently allocate
resources across infrastructure projects

B) An analysis of the government’s debt and of its capacity to raise additional capital on the
markets

C) An analysis of the cost efficiency and value-for-money of the government’s existing

infrastructure projects

D) A review of the government’s successful and unsuccessful implementations of

infrastructure projects

Copyright © 2017 IGotAnOffer Ltd. 15


The team is interested in the total economic growth (as measured by GDP growth) that can be
generated by investment in Public Private Partnerships both directly and indirectly. The team
therefore decides to look at how PPPs in different sectors have contributed to GDP growth in the
last 10 years, across selected countries.

The total contribution of PPPs to economic growth can be split into direct and indirect
contributions:

§ Direct contributions include the economic output directly provided by the project, such as
the payments of users on a toll road or in a port.

§ Indirect contributions include the additional output that can be produced by economic
agents benefiting from the project, such as industries exporting more goods thanks to new
transportation infrastructure.

Exhibit 2 shows the contribution to total economic growth (direct and indirect) of PPPs in all
sectors aggregated across selected countries over the last 10 years. Contribution in this context
means the number of percentage points of growth that can be attributed to PPPs. For instance, if
GDP had grown by 25% over the last 10 years and the total PPP contribution to growth was 5
percentage points, then 20 percentage points of economic growth are not attributable to PPPs.

Exhibit 2
Direct, indirect and total contribution of PPPs to economic growth over 10 years
(percentage points)

Copyright © 2017 IGotAnOffer Ltd. 16

22. Which of the following statements, if true, would BEST explain the difference in PPP indirect
contribution to growth between the transportation and healthcare sectors?

A) Expenditures on healthcare services have been stable over the last 10 years, whereas
revenues from transportation infrastructure have grown steadily

B) Good healthcare services have important benefits for the whole economy of a country, while
good transportation infrastructure only have benefits for industries strongly relying on
transportation networks

C) Healthcare services are provided free of charge to consumers and therefore only have an
indirect contribution to growth, while transportation infrastructure charge users for their
services

D) Industries strongly relying on transportation infrastructure have grown faster than the rest
of the economy over the last 10 years, while the healthcare sector has grown slower than
the rest of the economy

23. Which of the following statements is TRUE based on the information provided in Exhibit 2?

A) The direct contribution to growth of the energy sector represents less than 15% of the total
direct contribution to growth of all sectors combined

B) The indirect contribution to growth of the energy and telecom sectors represent more than
50% of the total indirect contribution to growth of all sectors combined

C) The direct contribution to growth of the healthcare sector and other sectors represent less
than 35% of the total direct contribution to growth of all sectors combined

D) The direct contribution to growth of the energy sector represents more than 15% of the
total direct and indirect contribution to growth of all sectors combined

24. If all sectors had the same proportion of direct and indirect contribution to growth as the
telecom sector, what would be the aggregate direct contribution to growth across all sectors to
the nearest tenth of a percentage point?

A) 0.3

B) 0.5

C) 0.7

D) 0.9

25. Which of the following pieces of information, in addition to that provided in Exhibit 2, would be
necessary to calculate the growth of the economy NOT attributable to PPP projects?

A) The total amount of GDP directly and indirectly attributable to PPPs 10 years ago

B) The level of the economy’s total GDP 10 years ago and today

C) The total amount of GDP directly and indirectly attributable to PPPs, 10 years ago and today

D) The level of GDP and the total amount of GDP attributable to PPPs 10 years ago

Copyright © 2017 IGotAnOffer Ltd. 17

26. If the GDP of Indonesia in 2013 was $900bn, and Indonesia was to enjoy the same benefits from
PPPs as the countries shown in Exhibit 2 over the next 10 years, what is the amount of
Indonesian GDP that could be attributed to indirect contributions of PPPs in 2023?

A) $11.7bn

B) $15.7bn

C) $19.7bn

D) $23.7bn

Copyright © 2017 IGotAnOffer Ltd. 18

Answer key
Milky Choc

1. D – The main concern of the CEO is that the demand for the new product will be too low to cover
its development costs. Even though profits are not mentioned explicitly by the CEO, she is
worried about both revenues (demand) and costs (development costs), which implies that she is
ultimately concerned about profits. This is what option D states. Option B and C are incorrect, as
the CEO does not mention that Milky Choc has any problems identifying trends and adapting to
new demand. Option A is also incorrect as she does not mention development costs for other
products.

2. D – Since the number of products consumed is not given anywhere in the data presented, the
average spend per product cannot be calculated.

IGotAnOffer detailed answer:

"Average total consumption of Milky Choc products (GBP) per person" corresponds to the total
revenues of Milky Choc (that is, the total amount of money that consumers spend on Milky Choc
products, in monetary terms (GBP)) divided by the number of customers of Milky Choc. Options
A, B and C all refer to this "average consumption", and could therefore be concluded from the
data.

Option D refers to average spend per product. This would correspond to the average amount
money spent by customers divided by the number of products this money is spent on. It would
therefore differ if, for example, different groups of customers purchase different types of products.
Without the number of products purchased by each quintile, you cannot conclude option D.

3. C – The percentage decreases of the five quintiles are respectively: Quintile 1 – 21%, Quintile 2 –
19%, Quintile 3 – 38%, Quintile 4 – 26%, Quintile 5 – 14%. The correct ranking is therefore 3, 4,
1, 2, 5.

4. B – If quintiles 1 and 2 had decreased by 20%, and quintiles 3, 4 and 5 had increased by 30%, the
consumption in the first six months of 2014 would be given by: Quintile 1, (42 - 0.2 x 42) = 34;
Quintile 2, (53 - 0.2 x 53) = 42; Quintile 3, (47 + 0.3 x 47) = 61; Quintile 4, (69 + 0.3 x 69) = 90;
Quintile 5, (88 + 0.3 x 88) = 114. The total spent across the five quintiles would therefore be: 34
+ 42 + 61 + 90 + 114 = £341.

IGotAnOffer detailed answer:

This question asks you to calculate the sum of total consumption across quintiles in the first six
months of 2014 if the year-on-year decrease compared to the first six months of
2013 had been the percentages stated in the question. In other words, for the purpose of this
question, you should ignore what the graph tells you about the total consumption in the first six

Copyright © 2017 IGotAnOffer Ltd. 19

months of 2014 and suppose that instead total consumption had decreased by 20% or 30% for
different quintiles. That is, you should suppose that the numbers for the first six months of
2014 were 20% or 30% lower than the numbers for the first six months of 2013 which are
shown on the graph, and then add them up.

For this reason, you should calculate these new hypothetical consumption numbers based on the
2013 consumption and not based on 2014.

5. B – The total number of 1-ratings given by existing customers is 25% x 20,000 + 10% x 20,000 +
20% x 20,000 + 10% x 20,000 = 13,000. The total number of new customers who gave 1-ratings
is 10% x 30,000 + 5% x 30,000 + 30% x 30,000 + 12% x 30,000 = 17,100. Therefore more new
customers gave 1-ratings than existing customers. So option B is incorrect. All other options are
correct.

IGotAnOffer special tip:

It is important to pay attention to the wording in the question to understand what you are asked
to calculate rather than to rely on your intuition. In this question, the result of interest in the
survey might well be percentage points for the team that uses the survey, and so you might
intuitively want to compare percentage differences. However, option B asks you to discuss the
number of 1-ratings and not the percentage of ratings. The phrase "more 1-ratings" indicates
that we are interested in the number rather than the percentage. If we were interested in the
percentage, the option would have referred to "a larger proportion" of 1-ratings.

6. A – If the number of new customers surveyed was equal to three times the number of existing
customers surveyed in Exhibit 2 (20,000), then 60,000 new customers would have been
surveyed. If 15% of those gave a 4-rating to the appearance of the new product, then 9,000 new
customers would have given a 4-rating. Compared to the 25% x 20,000 = 5,000 existing
customers who gave a 4-rating, this represents an extra 4,000 customers.

7. C – Option A cannot be determined from the data since it requires extrapolating to customers
not surveyed. Option B cannot be determined from the data since it is not possible to extrapolate
individual ratings, and therefore average ratings from the aggregated ratings. Option D cannot
be determined from the data presented either since there is no information about customers
who have not yet tried the product.

IGotAnOffer detailed answer:

While options A and D are quite straightforward to eliminate, choosing between options B and C is
more subtle. There are two differences between options B and C. First option C is about the rating
given to the taste of the product only, whereas option B is about ratings across all criteria.

More importantly, however, option B is about the percentage difference in customer surveyed
that gave this rating. For instance, suppose that 100 existing customer surveyed gave average
rating above 3 but 110 new customers gave average rating above 3, then the percentage difference
would be 10%.

Copyright © 2017 IGotAnOffer Ltd. 20

By contrast, option C is about the percentage point difference, that is, the number of percentage
points between the proportion of existing customers who gave this rating and the proportion of
new customers who gave this rating (both proportions expressed in percentages). You can see
what the difference in C is by simply looking at the results: for taste, 40% of existing customers
gave a 3-rating, while 15% of new customers did. Therefore the percentage point difference is 25
percentage points.

For option B, however, you do not know how many customers in each category gave a rating
above 3 in each category. It could be that the same customer gave only ratings above 3 in all
categories, or that a given customer gave some ratings above 3 in some category and some ratings
below 4 in other categories.

8. C – Option A is useful to assess how much of the product consumers will demand, given the price
that the company is expecting to charge for the product. Option B is useful to understand
whether the consumers who liked or disliked the product most are among the larger groups of
consumers. Option D is useful to assess whether consumers will be able to easily substitute this
product for other products, and whether the demand for healthier product is already catered for
by competitors. Option C is the least useful, as it requires more assumptions to conclude that
consumers who decreased their consumption over the last year did so because of the lack of
healthier products offered by Milky Choc.

9. C – Option A does not describe the thoughts of the analyst since he does not mention that he
disagrees with the fact that the existing survey may not be representative. Option B is also
incorrect since the data analyst does not comment on the cost of the existing survey. Option D
does not accurately describe the thoughts of the analyst either, since he does not suggest that his
proposed solution would make the survey more representative than the CEO’s solution.
Therefore option C is the one that best describes his thoughts.

IGotAnOffer detailed answer:

Notice that option D suggests that the analyst believes that doing the survey on an additional
10,000 would be more representative than doing two separate surveys as suggested by the CEO.
However, the analyst's discussion of sample size says precisely that only the sample size
matters for representativeness, not whether the survey is completely new, or whether it is just an
additional sample added to the original sample. So as long as the new surveys have a large
enough sample size, which of the two approaches is chosen doesn't matter for
representativeness according to the analyst. The reason why he recommends not doing two
completely new surveys is because this would be more expensive.

Paul Bakery

10. A – Between December and the previous two months, revenues increase but profitability
decreases. More cakes are sold in December at a higher price, but with a lower profit margin
than the rest of the products according to the information provided to you. Answer A would

Copyright © 2017 IGotAnOffer Ltd. 21

 therefore explain the effect described. The other options either contradict the effect described or
only explain part of it.

11. C – The average profits in October – November are given by Revenues x Profit margin, or
€37,323 x 14.0% = €5,225. The average profits in December are given by €38,543 x 7.5% =
€2,891. The absolute difference in profits between the two is therefore €5,225 – €2,891= €2,334.

12. C – Revenues increased by 3.3% between December and the average of the previous two months
((€38,543 – €37,323) / €37,323). Costs increased by 11.1% over the same period of time
((€35,666 – €32,111) / €32,111). Costs therefore increased more than twice as fast as revenues
between December and the previous two months. The other options are all incorrect conclusions
from the data presented in Table 1.

13. A – The profits per item are given by the profits calculated in the previous question and divided
by the number of items sold. €0.26 per item were generated in October – November (€5,225 /
19,890 = €0.26). €0.15 per item were generated in December (€2,891 / 19,302 = €0.15). The
bakery therefore made approximately 40% ((€0.26 - €0.15) / €0.26 = 42%) less profits per
items sold in December versus the average of October and November.

14. B – In October – November, one baker spends 50% of his time on cakes and produces 65 items.
In addition, the owner mentions that a full time baker works 160 hours per month. As a result,
the 65 cakes are produced in 80 hours. Producing a cake at this time of the year therefore
requires 1.23 hours (80 hours / 65 cakes), or about 74 minutes. Similarly, with 2.5 bakers in
December, the bakery produces 304 cakes. 2.5 bakers work a total of 400 hours (2.5 x 160 hours)
in December and a total of 1.32 hours (400 hours / 304 cakes) or 79 minutes is needed to
produce a cake. The difference in productivity is therefore about 5 minutes per cake (79 minutes
– 74 minutes).

15. B – All the measures suggested would decrease the time to bake a cake below October –
November’s 74 minutes except for answer B. By producing an additional 75 cakes, the bakery
would bring the monthly total to 379 cakes. According to Exhibit 1, 3 bakers are required to
produce this volume of cakes. In this scenario the productivity would fall to 76 minutes per cake
(3 bakers x 160 hours per month x 60 minutes per hour / 379 cakes). Productivity in answer A
would be 68 minutes, and 64 minutes in both answers C and D.

16. B – If the bakery had produced 15% fewer sandwiches in December, at least 4,167 (4,902 x 0.85
= 4,167) sandwiches would have been available for sale during that month. However, only 3,988
have been sold. The number of sandwiches produced therefore is not a constraint on the sales of
sandwiches. All the other answers can contribute to explaining the variation in the demand for
sandwiches between December and the previous two months.

17. D – The owner wonders if the additional gains in cake production productivity would be higher
than the lost revenue from sending customers to outlets that also sell bread and sandwiches.

Copyright © 2017 IGotAnOffer Ltd. 22

Public Private Partnerships
18. C – C is the only answer that encapsulates both the fact that your team has been hired to
investigate the link between PPPs and growth, and that it has been hired because of its
experience in the domain of PPPs.

19. B – Investment in transport infrastructure in Mexico currently represents 30% of total
investment or 30% x $47bn=$14bn. If this number grows by 20% per year it will be equal to
$20bn after 2 years, $29bn after 4 years and $42bn after 6 years. If total investment grows at 10%
per year it will be equal to $57bn after 2 years, $69bn after 4 years and $83bn after 6 years. The
respective proportions of transport infrastructure as a percentage of total investments are
therefore 36% after 2 years, 42% after 4 years and 51% after 6 years.

IGotAnOffer special tip:

In this question, you are told that PPP investment in transport projects in Mexico are growing
faster than total PPP investments in Mexico. This means that the share of total PPP investments
in that country accounted for by transport projects will grow over time. You know that
currently, transport projects represent 30% of total investments (95%-65% from the graph in
exhibit 1), so the question asks how many years it will take for that share to increase to 40%.

One way to do that would be to use the usual shortcut for calculating growth rates. However, since
the growth rates are large here, there is a risk that the approximation won't be good enough.

Alternatively, you can calculate the growth year on year of investments in transport projects on
the one hand and total investments on the other hand and calculate the corresponding ratio. By
simplifying the calculations you can do this relatively quickly and accurately.

One way you can simplify this is to assume that total investment in the current year is $50bn
instead of $47. This overestimates the result so you need to keep this in mind. From the graph, you
can see that transport infrastructure represents 30% of this. Since 30% x $50bn is equal to 3 x 5 =
$15bn, transport investment represents a bit less than $15bn.

From there, you can draw a table in your notes to make the calculation quicker. The table could
look something like this:

Year 0 1 2 3 4 5 6
Total 50 xx xx xx xx xx xx
Transport 15 xx xx xx xx xx xx
Ratio 30% xx% xx% xx%

Completing the missing values from left to right should be quick and straightforward: For the
"total" row, you need to add 10% every year (the growth rate of total investments in the
question), which means adding the tens digit to the total number (you can ignore the decimal
because we started by overestimating), this gives 50+5=55, 55+5=60, 60+6=66, 66+6=72,
72+7=79 and 79+7=87.

Similarly, you can do this with the "transport investment" row, which grows by 20% per year.
Since the numbers are smaller, you should now be careful with the decimals, but you can still
round to the nearest 0.5: divide the number by 10, round to the nearest 0.5, multiply this result
by 2 and add it to the number. This should give: 18, 22, 26, 31, 37 and 44.

Copyright © 2017 IGotAnOffer Ltd. 23

Finally, fill in the last row in the table, again by rounding your divisions. All you need to check is
which year out of 2, 4 or 6 has a ratio greater than 40%. You can clearly see that 22/60 is
lower, but that 31/72 is higher

20. D – China has invested 15% x $70bn=$11bn in other projects, while Brazil has invested 5% x
$95bn = $5bn in other projects. Therefore, the two countries combined have invested $16bn out
of their total $165bn ($70bn + $95bn) investment in other projects, which represents 9%
($16bn / $165bn = 9%) of total investment. Therefore about 91% of investment is in transport,
telecom or energy projects, which is more than 85%.

21. C – Cost efficiency and value-for-money are not among the main benefits of PPPs presented in
the description. Answer A corresponds to the third identified benefit of efficiently allocating
resources, answer B corresponds to the first identified benefit of providing additional capital,
and answer D corresponds to the second identified benefit of providing alternative
implementation skills.

22. B – Option A is wrong because it explains difference in DIRECT contribution rather than
INDIRECT. Option C is wrong because it only explains why the healthcare sector has only
indirect contribution and no direct contribution while the transport sector has both direct and
indirect contributions. Option D is wrong because the contribution to growth cannot be directly
deduced from the relative growth of the two sectors, and if anything, this statement would
support the opposite trend to what is shown in Exhibit 2.

IGotAnOffer detailed answer:

Eliminating options A and D are quite straightforward, but the difference between B and C is more
subtle. C only discusses the difference in direct contribution to growth. It says that, because
the healthcare sector does not charge end users, then it does not have a direct contribution to
growth. However, it says nothing about why the indirect contribution to growth is different
between transportation and healthcare. All it says about this is that healthcare should have
only an indirect contribution, not that it should have more or less of it than transportation.

On the other hand, option B discusses general benefits to the economy of the two sectors.
This therefore gives some indication about the indirect effect (as well as some indication on the
direct effect). Therefore, since the question is only about indirect effects, then option B is correct,
but option C is wrong.

23. B – The indirect contribution to growth of the energy and telecom sectors combined is 0.7
percentage points. The total indirect contribution to growth across all sectors is 0.4 + 0.3 + 0.1 +
0.2 + 0.3 = 1.3 percentage points. Since 50% of 1.3 is 0.65, then 0.7 represents more than 50% of
total indirect contribution to growth.

Copyright © 2017 IGotAnOffer Ltd. 24

24. C – The proportion of direct contribution to growth in the telecom sector is 0.1 / 0.4 = 25%. The
total contribution to growth across all five sectors is 0.7 + 0.4 + 0.6 + 0.2 + 1.0 = 2.9 percentage
points. Therefore, the total direct contribution across all fives sectors if all sectors had 25% of
direct contribution to growth would be 0.25 x 2.9 = 0.7 percentage points.

25. B – The total growth in the economy not attributable to PPPs is simply the total GDP growth of
the economy minus the contribution to growth of PPPs. Therefore the only piece of information
necessary is the growth of total GDP over the last 10 years for which the information in B is
sufficient. The total growth attributable to PPPs over the 10 year period is given in Exhibit 2 by
summing the contribution to growth across all sectors. None of the other options contain the
level of GDP today.

26. A – The total indirect contribution to growth of PPPs over 10 years in the countries shown in
Exhibit 2 is 0.4 + 0.3 + 0.1 + 0.2 + 0.3 = 1.3 percentage points. Applying this proportion to the
GDP of Indonesia in 2013 gives the amount of GDP that will be generated as an indirect
contribution of PPPs in 2023. This amount is €900bn x 1.3% = €11.7bn.

Copyright © 2017 IGotAnOffer Ltd. 25



IGotAnOffer is not affiliated to McKinsey & Company. Use of “McKinsey”, “McKinsey PST”, “McKinsey
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Copyright © 2017 IGotAnOffer Ltd. 26