The McKinsey Problem Solving Test (McKinsey PST) is a very crucial part of the McKinsey recruitment process. It is where most of the applicant pool is eliminated, and yet there are so few resources to help you prepare for it. Fortunately, you’ve found the ultimate guide to nail the test with an unbelievable level of detail!

1. PST Overview

1.1. What is PST?

The McKinsey Problem Solving Test (PST) is a paper-based test before in-person interviews, testing applicants’ math computation, data interpretation, and logical thinking capabilities.

1.2. Why do they need PST?

Why did Apple create the iPad when people had already had the iPhone and the Macbook?

It’s very similar to what we have here! McKinsey believes that the gap between CV screening and in-person case interviews is too big. The firm may miss many good candidates with bad resumes or may interview too many candidates who don’t live up to their resumes.

At the end of the day, in-person interviews are expensive, and the Problem Solving Test provides a cost-effective solution.

1.3. Who has to take PST?

Overall speaking, everybody is required to sit for PST. No matter your background, you have to take the exam before being processed into a case interview. Some told me that this test is waived for MBA-hired or associate levels. To the best of my knowledge, it is compulsory for anyone applying for a consulting track at McKinsey, no matter if you are undergrads or MBAs. If you are uncertain whether you have to take it or not, assume that you have to, and practice for it before having confirmation from the HR.

1.4. What does PST look like?

26 questions, 1 hour, paper-based, and no calculator! The test has 26 multiple choice questions set within the context of 3 business cases. A candidate has exactly 60 minutes to finish the test. He will be provided with a watch, pencils, scratch paper, and the test is in a paper-based format. No calculator is allowed. No personal assistant is allowed. Just you and the test!

As the business landscape is changing, candidate recruitment has become increasingly complex. This requires another way of presenting PST content for McKinsey. They have changed the format into gamification and planned to implement this method to all McKinsey offices within 2020. Visit the mock game designed exclusively for MConsultingPrep followers!

1.5. PST vs. GMAT vs. SAT?

If you are new to PST, you may hear the myth that PST is similar to the Math section in GMAT or SAT. In fact, being excellent in SAT Math does help with quantitative calculation in PST, however, the context is different. The SAT Math section includes only simple calculations in simple context; meanwhile, logic in business problems is highly emphasized in PST.

1.6. Cut-off score or Passing-rate?

Many of you emailed me and asked whether McKinsey uses a cut-off score e.g. 50% of the test or a passing rate e.g. 1% of applicants. The answer is they use a cut-off score. McKinsey has never confirmed but the cut-off score is around 70%. If your score is exactly or higher than that caliber, congratulations! But if you are just 1% lower, sorry but see you next time! With that being said, the average passing rate of McKinsey PST is 1-over-3. Sounds difficult, but if you are well-prepared, you will be among the 33% successful!

1.7. Why is this test so challenging?

  • You will not have enough time to properly think through each question.
    If you are going to read every single word in the case background and do every calculation “asked”, you will not be able to finish the test. You will need to know how to work through stress and pressure, how to give out “high-probability” answers instead of “exactly-right” ones, and how to painlessly skip questions.
  • You will be judged by a machine (or if by a person, they will try to be like a machine).
    I myself feel much more comfortable in an in-person case interview, where I will be fine as long as I have the right tactics. The interviewers generally allow candidates to make a few mistakes here and there, to slow down the process if needed, and to ask for help when necessary. In the PST, the result is all that matters. There will be no mercy granted. If you don’t get enough correct answers, you are out.
  • On top of those, the questions themselves are hard!
    A huge amount of logical and analytical reasoning is required. You will need to really grasp the logical fundamentals of how management consultants solve problems, e.g: the difference between a conclusion vs a hypothesis; etc.

1.8. How many hours should I spend preparing for PST?

Though I can not give you the exact hour to prepare for your PST, I did spend 25 – 30 hours a week preparing for it. PST looks extremely hard when you are not well-prepared. The more time you spend, the better chance you have. I always suggest my students pick up their prep process as soon as possible. However, if you do not have enough time, focus on the things you can control as we will pull it off no matter how much time is left for preparation!

1.9. What should I do if I have little time to prepare?

Some emailed me and asked what they should do if there were 3 days left until the PST. I would still suggest you follow our spirit of learning. When you have little time, choose which question you want to prioritize, tackle it carefully and decide how deep you will go into it. If I were in your shoes, I would use this prioritization table:

Question Type Weight (%) Difficulty Prioritization No.
Reading Facts 38 Low

1

Root-cause Reason 13 Medium 2
Word Problem 12 Medium

3

Client Interpretation 8 Medium

4

Formulae 5 Low

5

Fact-based Conclusion 14 High

6

In addition to the above, I would suggest you practice your math in these last days. The learning curve at the beginning is usually high for anything, including Mental Math. Doing better math can significantly improve your test score. It reduces simple mistakes (which can still cost you points) and allows you to have more time for other questions.

2. Master studying plan for McKinsey PST

3. PST Question Types

3.1. Reading Facts

Reading-facts is the most common question type in the McKinsey PST (38%) and the BCG Potential Test (up to 100%). These questions test your ability to understand the facts/data itself. There will be no inferring, logic, hypothesizing, or creativity needed. Instead, proficiency in chart reading and calculations will be handy here. See the picture below for an illustration.

mckinsey pst fact reading question

QUESTION FORMAT

The following are a few examples of typical question formats:

  • Which of the following values is the best estimate of…?
  • Which of the following statements is valid based on the data…?
  • Which of the following can be concluded from Exhibit…?

Sometimes even though the word “conclude” is used, questions don’t require any logical reasoning, just your ability to read facts and perform basic calculations. In these cases, I still classify these questions into the reading-facts category.

This question is written based on an official McKinsey practice PST.

  Revenue This Year  Average Annual Revenue Growth Over Last 5 Years
Soccer $342.8 K  4.5%
Basketball $62.3 K 3.3%
Tennis $55.6 K 1.2%
Golf $13.9 K -9.0%

Which of the following statements is valid based on the data in Table 1?

A) Soccer revenue was more than $325 thousand five years ago

B) Tennis revenue grew by no less than 1.2% in each of the last five years

C) The total revenue of Saigon League did not grow at all in the last five years

D) If the growth rate in the last 5 years is maintained, Soccer revenue will be more than $420K 5 years from now.

You will see that no tricky logical reasoning is needed here. All you need in order to answer these questions is the ability to read the table and perform calculations correctly.

COMMON MISTAKE

A good way to determine the correct option is to investigate if the other three are wrong. Now there are two ways you can be wrong in this type of PST question: (1) Incorrect calculation and (2) Misread the facts/ data

Type #2 is harder to understand, so I will dive deeper into that here. Let’s look at the sample question above. Hope you got D, the correct choice.

Example 1: How you can misread the data – Why A is wrong

If you overlook the phrase “Average annual” on column 3′s title, then Soccer revenue 5 years ago would be: $342.8 K / (100% + 4.5%) = $328 K, which is more than $325 K. Revenue grew at an average rate of 4.5% in EACH of the last 5 years. It is NOT 4.5% over the whole period of 5 years.

Example 2: How you can misread the data – Why B is wrong

If you overlook the phrase “Average” in column 3′s title, then it seems like the growth rate for each of the last 5 years is exactly 1.2%, no more, no less. B, therefore, seems correct. However, as indicated in the table, 1.2% is just an average figure, which means there are years with a lower or higher growth rate.

Example 3: How you can misread the data – Why C is wrong

If you overlook the second column of the table (Revenue this year column), then it seems like the average overall growth rate for Saigon League is 0% (4.5% + 3.3% + 1.2% – 9% = 0%), which makes C correct. However, different lines have different sizes. Even though Golf had negative growth of 9%, it is a relatively small line so its impact on the overall rate is small as well.

Hope that you will not make this mistake in your real PST. Again, PST is a simple test… when you have enough time!

PREPARATION GUIDE

I am always amazed that up to 38% of your success depends on questions that require very basic skills. Your overall PST result can be greatly improved simply by focusing on the fundamentals.

Skill #1: Calculation

We have a detailed article on Consulting Math and how to strengthen your quantitative proficiency.

Skill #2: Chart/exhibit/table reading

Always take a moment to read and understand every single chart or graph you encounter in your everyday life.  After all, practice makes perfect.

You can also improve your reading speed through an amazing speed reading program by Princeton University. 

Skill #3: Attention to details

The devil is in the details. It’s the little things that can make or break a project, and no true consultants would let themselves be caught unaware.

Develop a habit in daily life. Have the mindset that I am not going to miss any stupid details.

For every practice question you get in this type, make sure you understand not only why an answer is right, but also why an answer is wrong, exactly like what I did above.

Which of the following statements is valid based on the data provided on Graph 3 above?

A) The Service-to-Agriculture ratio increased by more than 3 times between 1995 and 2007

B) Service GDP in 1995 is more than Industry GDP in 2007

C) Agriculture is where GDP value dropped the most between 1995 and 2007

D) In 2007, Service GDP is no less than 6 times Agriculture GDP

ANSWER KEY

Correct answer: D

If you want to practice more, visit our Comprehensive PST for questions and answers!

3.2. Fact-based Conclusion

Once you get into consulting, you will probably hear the term “fact-based” a million times a day. Consulting is the business of making conclusions based on facts. Consultants face tons of different problems throughout the course of any project: from the top to the granular level, from function to function, from industry to industry, etc. Fact-based conclusion is such a fundamental aspect of consulting that it weighs in heavily on the PST.

Fact-based conclusion questions test your ability to draw and recognize sound and logical conclusions based on a set of data/facts provided. See the picture below for an illustration.

mckinsey pst fact based conclusion

QUESTION FORMAT

  • Which of the following statements is a valid conclusion based on …?
  • Which of the following statements can be concluded from …?

This question is written based on an official McKinsey practice PST.

***

The McKinsey team has an interview with the Chief Operating Officer of the New Bingham Mine, Salt Lake City. During the interview, the following facts have been gathered:

  • The factory must have at least one safety inspector 24 hours a day, seven days a week, in accordance with Federal and State labor regulations.
  • To maximize operational efficiency, there must be exactly 10 line workers operating the mine.
  • The mine operates from 8 am until 5 pm, Monday to Sunday.
  • The mine employs 4 safety inspectors and 16 line workers to make 20 workers in total.
  • The total weekly labor cost for the Bingham Mine is $16,000.

Which of the following statements is a valid conclusion?

A. One-fifth of the total labor cost for the mine is for safety inspectors.

B. At least one safety inspector must work more than 40 hours per week.

C. Line workers do not work more than 40 hours per week.

D. The majority of the mine’s labor cost is for line workers.

ANSWER KEY

A – Fit-well but not fact-based

There are 4 inspectors out of 20 employees so it seems like the cost of the inspectors can very well be 1/5 of total labor cost. But a missing piece of data to conclude that is: does each person get a similar total income?

C – Fit well but not fact-based

The mine opens for 9 hours per day, 7 days per week, and there must be 10 line workers at a time, so it is 630 man-hours per week at the line positions. There are 16 line workers, so on average each of them only needs to work 39 hours per week. This seems to fit very well with the proposed conclusion: line workers do not work more than 40 hours per week. However, a missing piece of data to conclude is: does every line worker work the same amount of time (if not, there can be some who work over 40 hours while others work less)?

D – Fit well but not fact-based

Similar to A, there are more line workers, so it seems like the total cost for line workers is more than the total cost for safety inspectors. But a missing piece of data needed to conclude is: does each worker get paid the same amount?

Only B is proven true by the provided facts

There are 24 * 7 = 168 inspector hours needed in a week, equaling 42 hours per week per inspector. So there must be one who works more than 40 hours.

Identifying proven true conclusions is an important foundation to master all conclusion-related questions. However, most conclusion-related questions in the McKinsey Problem Solving Test will be given in other formats. In this section, we will learn about the two types of twists: (1) False conclusions and (2) Conclusions reversed. Let’s start with the first one.

TWIST TYPE 1: FALSE CONCLUSION

Any proposed conclusion must fall into one of the following three groups: Proven TrueProven False, and Unproven. This twist is when a question asks you to identify the False Conclusion instead of the True Conclusion.

QUESTION FORMAT

  • Which of the following statements is FALSE based on …?
  • Which of the following statements is FALSE based on … ?

METHODOLOGY

A proposed conclusion is proven false when you can point out at least one instance where the conclusion is wrong. Similarly, with true conclusion questions, unproven conclusions should also not be selected.

Notice that proven FALSE conclusions are NOT conclusions not proven TRUE. A conclusion will stay unproven until it is proved to be TRUE or FALSE.

This question is written based on an official McKinsey practice PST.

Measure Explanation  A, Inc. B Corp. C, LLC D, LTD
Maximum recent revenue growth Highest one year revenue growth in the last 5 years 15% 6% 12% 10%
Minimum recent revenue growth Lowest one year economic growth in the last 5 years 6% 5% 1% 2%
Investment risk rating Ranked A: highest risk to E: lowest risk B D A B
Potential rating Ranked 1: least potential to 10: most potential 7 6 7 5

Which of the following statements is FALSE based on Table 1?

A. A, Inc. had lower average economic growth in the last five years than D, LTD.
B. A, Inc. had higher average economic growth in the last five years than D, LTD.
C. Investment risk rating is based on the difference between maximum and minimum revenue growth in the past five years.
D. Potential rating is based on the maximum recent revenue.

ANSWER KEY

Of A and B, A seems to be false and B seems to be true. However, both of them are unproven. The maximum and minimum figures are not enough to conclude the average.

We don’t know if C is right or not, but we know that it is not proven false. In the provided data, there is no instance where the larger difference between maximum and minimum recent revenue growth indicates smaller risk (and vice versa).

With D, we know for sure that it is proven false because we can point out an instance where the assertion conflicts with the data (B Corp. vs. D, LTD.).

TWIST TYPE 2: CONCLUSIONS REVERSED

Very often, conclusion questions in the McKinsey Problem Solving Test are given in a reversed format. You will be given the conclusion first and asked to pick what facts/ data would be enough to come up with that conclusion.

The key to answering this type of question is to recognize which proposed fact makes the stated conclusion proven or unproven.

This question is written based on an official McKinsey practice PST:

FOCUS Travel is a premium Russian tourism company, offering tours to South East Asian countries. Facing the economic downturn, FOCUS revenue has been hurt badly. While the CFO (Chief Finance Officer) proposed an overall price cut to stay competitive, the CMO (Chief Marketing Officer) is concerned that a price reduction would negatively impact the premium perception of the brand, which drives a lot of sales.

Which of the following statements, if TRUE, would best support the CMO’s assertion?

A. In a recent survey, FOCUS’s customers quoted “price” as the most important indicator in choosing travel agencies in a list of ten factors.
B. In a recent survey, FOCUS’s customers quoted “price” as the most important indicator of quality in a list of ten factors.
C. In a recent survey, there were customers who said they would not buy FOCUS’s services if there was a 10% price increase.
D. In a recent survey, there were customers who said they would not buy FOCUS’s services if there was a 10% price decrease.

ANSWER KEY

In this question, the “conclusion” has been given to us: Price reduction will negatively impact the premium perception, which will in turn negatively impact sales.

Of the four proposed answers, which facts are enough to prove the provided “conclusion” above?

A: This fact is only enough to conclude that price will impact sales. Not enough to prove that price reduction will negatively impact sales.

C: This fact is irrelevant.

D: This fact is not enough to conclude that price reduction will negatively impact sales because not all customers say so. The word “there were” can be understood as either a minority or a majority. It is only enough to conclude the proposed conclusions when “there were” is replaced with “the majority of” or “all“.

With B, we can logically infer that price reduction will negatively impact the quality perception, which in turn will hurt to sales.

3.3. Root-cause Reason

This question gives you a particular set of facts/data and asks you to identify what could be the cause for them. When doing a real consulting project, we consultants have to find out the root-cause reason. There may be various reasons that can cause the current situation, but the root-cause reason will help us tackle and solve it more efficiently. You can see the picture below for an illustration.

mckinsey pst root cause question

QUESTION FORMAT

The following are a few examples of typical root-cause reason question format:

  • Which of the following reasons, if TRUE, will help explain the Facts …?
  • Which of the following does NOT explain the Facts …?
  • Which of the following points is NOT a valid reason for the Facts …?

A – Fit-well but not fact-based

There are 4 inspectors out of 20 employees so it seems like the cost of the inspectors can very well be 1/5 of total labor cost. But a missing piece of data to conclude that is: does each person get a similar total income?

C – Fit well but not fact-based

The mine opens for 9 hours per day, 7 days per week, and there must be 10 line workers at a time, so it is 630 man-hours per week at the line positions. There are 16 line workers, so on average each of them only needs to work 39 hours per week. This seems to fit very well with the proposed conclusion: line workers do not work more than 40 hours per week. However, a missing piece of data to conclude is: does every line worker work the same amount of time (if not, there can be some who work over 40 hours while others work less)?

D – Fit well but not fact-based

Similar to A, there are more line workers, so it seems like the total cost for line workers is more than the total cost for safety inspectors. But a missing piece of data needed to conclude is: does each worker get paid the same amount?

Only B is proven true by the provided facts

There are 24 * 7 = 168 inspector hours needed in a week, equaling 42 hours per week per inspector. So there must be one who works more than 40 hours.

Facts provided: Visits to the website MConsultingPrep were relatively low last month.

Root-cause Reason Question: What reasons, if TRUE, would help explain the low traffic to MConsultingPrep last month?

The correct answers can be any of the following:

  1. The quality of contents has been bad
  2. Because of technical issues, some visitors could not access the website
  3. Last month was December when the overall demand for job prep materials is lowest in the year
  4. Other new consulting prep blogs opened recently

Fact-based Conclusion Question: What can be concluded from the data provided?

All of the statements above can be the reason for the stated fact, but NONE of them can be concluded from it.

An example of a statement that can be concluded: Because the conversion rate stayed constant over the years, revenue last month was relatively low.

COMMON MISTAKES

What makes a statement NOT a potential reason for a particular fact?

There are two ways a statement cannot be the potential reason: (1) Wrong Subject and (2) Wrong Trend.

  • A statement is (1) Wrong on Subject when the subject is irrelevant, which means the statement has zero effect on the phenomenon mentioned in the stated fact.
  • A statement is (2) Wrong on Trend when the direction is reversed, which usually means the statement has a reversed effect on the phenomenon mentioned in the stated fact

Illustrative example

Let’s continue with the simple example above. The Stated Fact: Visits to the MConsultingPrep blog were relatively low last month.

(1) Example of a “Wrong Subject” statement: “Some new Investment Banking Prep blogs opened recently”

Here the subject “Investment Banking Prep blogs” is irrelevant to the stated fact. The statement (1) will have zero effect on the stated fact.

(2) Example of a “Wrong Trend” statement: “Some other existing Consulting Prep blogs closed recently”

Here, even though the subject “Consulting Prep blogs” is relevant, the trend is reversed. The exit of Consulting Blogs will increase visits to MConsultingPrep. Therefore, statement (2) will have an opposite effect on the stated fact.

Fletcher is a major Steel producer in the Pacific continent. It has markets in New Zealand, Australia and other South East Asia countries. Of many types of steels, re-bar (reinforced bar) is typically used in high-rises and big construction projects.

There are three main groups of steel consumers in New Zealand:

  • Homeowners purchase steel at retail sizes for purposes of self-constructing and self-renovating their homes
  • Scaled private construction companies, who often contracts large construction projects and steel orders
  • State-owned Enterprises (SOE), who build government’s projects such as roads, bridges, schools, hospitals, etc. (SOEs usually have bargaining power since steel providers need governments’ permissions in order to be legally used in particular countries.)

Table 1 below shows the size of re-bar steel market (in billions of $US)

  Market size today Market size in 5 years
New Zealand market 138 267
Australia market 350 665
South East Asia market 502 2,254

Which of the following statements, if TRUE, best explains why future trends for South East Asia sales differ from sales in the other two markets?

A) South East Asia population is expected to grow strongest, which lead to high steel demand from individual homeowners.

B) South East Asia economy will be heavily based on SOE, so will the construction market.

C) South East Asia economy will shift toward privatization, so will the construction market.

D) Developed markets of New Zealand and Australia will have the most advanced steel production technology and facilities.

ANSWER KEY

Correct answer: C

3.4. Word Problem

Word Problem is a quantitative question where the answer cannot be calculated directly from the data provided. Usually, we have to set up one or more equations in order to solve this kind of question. Word Problem questions in the McKinsey PST and Case Interviews are just the word problems we usually see in schools, GMAT… but put into business contexts. The method to solve them, therefore, is the same.

This question is written based on an official McKinsey practice PST.

Table 1: Data on the Washing Room of Jean Valjean Restaurant

  Manual Process Machine Process
Labor cost per hour 30 Franc 30 Franc
Labor resource needed to wash and process dishes 5 dishes per minutes 1 person per shift
Set up and clean-up labor time time per meal shift 20 minutes (1 person) 1 hour
Other costs   350,000 Franc purchase and running costs for machine’s 5 years lifetime

Suppose the restaurant opens 350 days a year. There are 3 meal shifts per day, 1 shift lasts 3 hours, 1 customer uses an average of 5 dishes per visit, and currently the restaurant hosts 530 customers on average daily.

What percentage of increase in the number of daily visits would be required in order to make purchasing the machines financially beneficial?

A. 25%
B. 50%
C. 100%
D. 200%

METHODOLOGY

METHODOLOGY ILLUSTRATION

Let’s solve the sample question above together.

3.5. Client Interpretation

In every consulting project, communication with the clients’ top-level (usually the Chairman or CEO) is always important. During my time with McKinsey, we usually hear an update every one or two weeks from our Project Director (usually a partner) on his meeting with the clients’ top level. Messages from those meetings are important on-going steers for the project. No surprise it makes up an entire question category in the Problem Solving Test.

Client Interpretation questions test your ability to read, understand, and interpret the messages the client is trying to convey in the case question or description. To some extent, this is very similar to GMAT verbal questions.

QUESTION FORMAT

  • Which of the following best summarizes the CEO’s concerns?
  • Which of the following statements best describes the thoughts of the CEO regarding…?
  • Based on the opinion of the head of the Department, which of the following statements is valid?
  • Which of the following statements best describes the CEO’s aims for the McKinsey research?

Case context:

Mommy said she saw some dirty clothes on the dining table. She is also quite shocked to see Kevin’s toys in every room throughout the house. She even complains about how much time it takes her every night to clean up Kevin’s mess. “I will have to have a very straightforward conversation with Kevin tonight!”, said mom

Which of the following statements best describes the Mom’s concern?

A. Mom is not happy about too many of Kevin’s toys sitting on the dining table

B. Mom does not expect to see that many of Kevin’s toys in the house

C. Mom does not like to be responsible for anyone’s mess

D. Mom is too busy these days

E. Mom wants to talk to Kevin

F. Mom wants Kevin to be tidier

ANSWER KEY

Analyzing:

In this example, we continuously get small data points, all leading to one bottom-line, not explicitly mentioned but can be reasonably interpreted:

Kevin is too messy and mom doesn’t like that!

Notice that, the bottom-line here is not explicitly stated but it IS the bottom-line. All 4 sentences in the case context are small pieces of data leading to that final “so-what”. Having this “so-what” in mind, you can just skim through the answer and quickly pick F without concern about other choices.

In case you are curious about how other choices are “wrong-choice” … 

Choices B and E are in fact right according to the case context, but not the bottom-line.

Choices A is simple wrong according to the case context (Tip #2)

Choices C and D are neither right or wrong according to the case context. There are not enough “evidence” to be reasonably interpreted using common sense.

TIPS AND TRICKS

Tip #1: Read the case description before going to multiple choices!

Normally the strategy of scanning through the answers first before going back to the case description works when you have a very long case description and don’t know where to look for the right information. Scanning through the answers helps you get a more focused read on the case description. However, the client’s assertion is typically found in a very short and specific part of the case description. So once you realize it’s a Client Interpretation question, go back to the case description and find that very specific part of the client’s assertion. Make sure you understand it very well. Then the rest of the work is just determining which of the four choices has the same meaning as the original assertion.

Tip #2: Cross out some obviously wrong choices …

… by recognizing a few words or short phrases that make a choice incorrectly reflect the client’s assertion. Sometimes, you can do this very quickly and effectively. If not, please see tips #3.

Tip #3: Catch the bottom-line, the “so-what” of client’s assertion

Client’s expression as quoted in the case context is always a bit blur and confusing. That is very realistic of what you may encounter in the real consulting work. It also makes these question types challenging. But in almost every situation, there is always one “so-what”, stated explicitly or implicitly. The trick here is to catch that so-what, ignore the noise, and go straight for the answer choice. Most of the time, the wrong choices DO contain a part of the client’s assertion, but either not the whole idea or the main, the bottom-line, the most important one!

Using this method, you can fly and land straight to the correct choice, not having to care too much about how wrong choices are made of. But if you are curious, some of the most common wrong-choice types:

  • Choice that is simply wrong according to the client’s assertion (Tip #2 above).
  • Choice that is in fact right, but is a minor point, NOT the bottom-line of the client’s assertion.
  • Choice that seems to be right, but cannot be reasonably interpreted by common sense (not by scientifically supporting logic like in other question types).

Gangnam Market is a convenience-stores chain mainly in the Gangnam district, Seoul, Korea. Though it has been losing money almost every year since 2000, Gangnam Market secures a good deal of strategic locations in the highly populated Gangnam district. Recently, Gangnam Market was acquired by Lotte Mart in its aspiration to expand to the mini-market market. Lotte right away sets up a transformation project to get Gangnam Market back on track. The CEO of Gangnam Market states that aggressive transformation targets are fine for newly acquired stores with a similar operation model with Lotte’s big stores, but he hopes that the parent company is realistic about the convenience-stores model Gangnam has been operating with.

Which of the following statements best reflect the concerns of Gangnam Market’s CEO?

A) He is concerned that Gangnam Market will never be able to transform itself into Lotte system because Gangnam Market only presents in a specific geographic location

B) He is concerned that Lotte Mart sets transformation milestones that are too aggressive and not realistic for newly acquired companies like Gangnam Market

C) He is concerned that Lotte Mart’s transformation milestones are not realistic for companies with different operational model from Lotte Mart like Gangnam Market

D) He is concerned that Lotte Mart’s transformation targets are too high for Gangnam Market because it has been losing money for a while

 

ANSWER KEY

Correct answer: C

3.6. Formulae

Formulae questions are generally like word problems in PST where you don’t have to provide the actual numerical results, just the formulae containing letters representing input variables. Normally, the question will provide input variables in letter format and you will be asked to provide the right formulae in letter format (e.g. it takes the process center T hours to process each file. If the speed is doubled, it takes T/2 hours to process each file). This is one of the easiest PST question types on the McKinsey PST. Let’s make sure you don’t lose points on any question of this type in your exam!

This question is written based on an official McKinsey practice PST.

* * *

Table 3.6.1: Labor Cost and Processing Data – Holcim Missouri plant

  2011 2012
Monthly labor salary (p) $1,120 $1,280
Cement output (c) 2.2M tons 2.8M tons
Blue-collar labor cost (b) $5,376K $6,144K
White-collar labor cost (w) $1,344K $1,536K

Which of the following formulae accurately calculates the annual cement output per worker?

A. (c x p) / (b + w)

B. (c x p) / [(b + w) x 12]

C. 144 x (c x p) / (b + w)

D. 12 x (c x p) / (b + w)

FORMULAE FOR SUCCESS IN FORMULAE QUESTIONS

Formula 1: Calculate first before looking at the given option

A popular technique for multiple-choice questions is to read the answers first before coming back to the facts. However, that technique would not help you with Formulae Questions. The reason for this is that, often, the end-result formula has already been simplified (e.g. canceling out the same variable on both numerator and denominator) as much as possible. It gives you neither the path to get there nor any hints on how to solve the problem. For instance, when you look at the four options in the example above, does any of them give you a sense of what it represents or how to get there? What does (c x p) represent? What do you get by multiplying Cement output by Monthly labor income?

Formula 2: Divide the problem into smaller pieces (take one step at a time)

This is the universal tip for everybody in the consulting industry, and it also works great here! Often, the result cannot be directly calculated from the provided variables. However, if you take an extra step in-between, the problem becomes a lot easier. Let’s solve the sample question above together to illustrate this point. I broke the problem into smaller steps as below:

  • Step 1: Annual cement output per worker = Total annual cement output / Total number of workers
  • Step 2: Since we already have Total annual cement output of (c), the next step is to calculate the total number of workers.
    • Total number of workers = Total labor cost / Salary of 1 worker
    • Both Total labor cost and salary are provided. Bingo!
  • Step 3: Simplify the final formulae

Formula 3: Get the reading-facts tools right

In some aspects, the formulae question is also a tweaked version of reading-facts questions. You still need to read some facts and perform some calculations (with letters instead of real numbers). Therefore, it is important to master those reading-facts tools and apply them here.

Illustration of a usual mistake: Now come back to Step 2 above and explicitly solve it.

Step 2: Total number of workers = Total labor cost / Salary of 1 worker = (b + w) / p

Step 3: Annual cement output per worker = c / [(b + w) / p] = (c x p) / (b + w)]

Chosen choice: A

* * *

Unfortunately, A is NOT the correct answer, because the above calculation doesn’t take into account the difference in units – the salary is on a monthly basis whereas the total labor cost is on an annual basis. If you convert the unit, the final choice should be D.

No matter how beautifully you have tackled the problem, you will not get any credit if small mistakes like this slip through the crack. Make sure you don’t get blindsided by this kind of pitfall!

VICEM is a leading cement company in South East Asia. The following data regarding its business and production has been gathered.

Table 3.6.2: VICEM Business and Production data

  2012
Cement Sold (s) 20.2M tons
Cement Produced (p) 20.2M tons
Clinker Stock at year begin (c) 4.5M tons
Clinker factor (f) 65

Clinker factor is defined as the amount of clinker needed to produce 100 units of cement. 

Which of the following formulas calculates the amount of clinker (in tons) needed to purchase in a year?

A) [(s x f) / 100] – c

B) [(p – s) / 100] – c

C) (p x f) – c

D) [(p x f) / 100] – c

ANSWER KEY

Correct answer: D

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