Practice Questions for XAT DM 2026 with Detailed Solutions

Ethical Dilemma – Office Policy

You are the HR manager at a mid-sized firm. One of your top employees, Ravi, has been underperforming recently. You learn he is facing serious family problems. However, the company is about to conduct a major appraisal cycle where Ravi’s performance ratings may affect his promotion prospects.

What should you do?

A. Rate him strictly based on his performance.

B. Give him an average rating out of sympathy.

C. Discuss the issue privately and offer temporary flexibility.

D. Recommend him for promotion to retain him.

E. Ignore the personal issue as it’s not relevant to work.

C

Shows empathy and fairness — supports the employee without compromising appraisal integrity.

Business Ethics – Supplier Bribe

You are a procurement officer. A supplier offers a “personal gift” to secure a contract. He claims all competitors do the same.

The most appropriate action would be

A. Reject the offer and report it to your superior.

B. Accept it but keep it secret.

C. Negotiate for a higher bribe.

D. Ignore the offer and proceed with evaluation.

E. Return the gift and finalize the supplier anyway.

A

Transparency and ethical reporting maintain organizational integrity.

Customer Churn Analysis

Analytics shows that older customers are less profitable. Management wants to cut loyalty benefits for them.

What should you advise?

A. Remove benefits to save costs.

B. Offer personalized services instead.

C. Ignore the data.

D. Shift focus to younger clients only.

E. Increase prices for older customers.

B

Ethical and customer-oriented; uses analytics insight to re-strategize, not discriminate.

Ethics vs Profit

A retail chain’s predictive model shows higher profits if lower-quality material is used without informing customers.

What is the most appropriate managerial action?

A. Implement the change quietly.

B. Disclose and justify with lower prices.

C. Ignore data and continue old process.

D. Stop using analytics for such decisions.

E. Leave the choice to customers.

B

Balances transparency and profit motive—ethical and practical.

Team Conflict – Productivity Issue

Two senior team members frequently argue, disrupting team performance.

What should you do first?

A. Fire both employees.

B. Conduct a joint meeting to mediate the issue.

C. Ignore them since both are talented.

D. Reassign them to separate teams.

E. Escalate to top management immediately.

B

Mediation shows leadership and problem-solving before taking extreme steps.

Public Responsibility

A company discovers its product might have minor safety issues. No accidents have occurred yet, but recalling products would be costly.

What’s the best decision?

A. Ignore the issue as it’s minor.

B. Recall only if an incident occurs.

C. Immediately inform consumers and recall voluntarily.

D. Fix future products quietly.

E. Delay announcement till the next audit.

C

Consumer safety and transparency uphold ethical business conduct

Data-Driven Dilemma

A logistics company’s analytics dashboard suggests firing 10% of warehouse staff to improve efficiency. However, these employees are from economically weak backgrounds.

What should the manager do?

A. Fire them as per data insights.

B. Modify algorithms to retain them.

C. Use analytics to retrain and reassign roles.

D. Ignore analytics to maintain morale.

E. Wait for HR to intervene.

C

Ethical + data-aligned. Retraining uses analytics insights for improvement, not exploitation.

Work Pressure

An employee refuses overtime citing family commitments during a crucial project deadline.

What should the manager do?

A. Force the employee to stay.

B. Allow leave and distribute work among others.

C. Deny leave and threaten disciplinary action.

D. Understand the concern and negotiate flexible timing.

E. Replace the employee.

D

Balances human sensitivity and project needs through flexibility.

Data Privacy

A colleague shares client information over a public Wi-Fi network.

Your response should be

A. Ignore it since the intent wasn’t malicious.

B. Report to IT and remind him about data policy.

C. Forward the data to your boss.

D. Share data similarly since others do it.

E. Do nothing

B

Prevents recurrence while reinforcing awareness and policy adherence.

Employee Monitoring

An AI tool flags some employees as “low performers,” but they work in departments with poor systems.

As a manager, you should:

A. Trust AI completely.

B. Ignore AI results.

C. Use analytics as one input and investigate further.

D. Replace all low scorers.

E. Wait for management to decide.

C

Balanced—uses analytics with contextual human judgment.

Promotion Dilemma

You can promote either a hardworking but average performer or a brilliant but arrogant employee.

Who should be promoted?

A. The brilliant one — results matter most.

B. The hardworking one — teamwork sustains results.

C. Neither — promote an outsider.

D. Delay promotion for both.

E. Toss a coin.

B

In long term, attitude and teamwork outperform individual brilliance.

Resource Allocation

Two departments request extra budget, but only one can be approved.

What’s the right approach?

A. Approve the one with short-term benefits.

B. Divide equally.

C. Evaluate ROI and strategic importance.

D. Pick the department you prefer.

E. Wait till next quarter.

C

Objective evaluation ensures fairness and aligns with business strategy

Cost-Cutting Decision

A data model suggests automating a process that will lead to layoffs. The cost saving is significant.

What is the best decision?

A. Implement immediately for profit.

B. Delay to explore redeployment.

C. Cancel due to ethical reasons.

D. Outsource instead.

E. Ignore the suggestion.

B

Trade-off between efficiency and ethics—redeployment ensures responsible transition.

Whistleblowing

You learn that your boss manipulates reports to please the board.

What should you do?

A. Ignore to avoid risk.

B. Collect evidence and report to internal ethics committee.

C. Leak it to media.

D. Confront your boss directly.

E. Tell colleagues.

B

Institutional reporting channels preserve confidentiality and professionalism.

Conflict of Interest

You’re on a hiring panel where one candidate is your close friend.

What is the best course of action?

A. Support your friend quietly.

B. Excuse yourself from the panel.

C. Tell your friend to prepare better.

D. Reject your friend to appear fair.

E. Hide the relationship.

B

Avoids conflict of interest by stepping aside transparently.

Policy Change Impact

Analytics shows that stricter attendance policy increases punctuality but reduces creativity.

What should management do?

A. Continue strict policy for discipline.

B. Relax policy to promote creativity.

C. Create a hybrid attendance model.

D. Cancel attendance monitoring.

E. Seek HR’s approval first.

C

Balances data-driven insight and people-oriented flexibility.

Customer Complaint

A loyal customer complains publicly about a defective product

What should you do first?

A. Ignore as social media overreacts.

B. Respond politely and resolve quickly.

C. Block the customer’s comment.

D. Offer a discount instead of apology.

E. Wait for official PR response.

B

Immediate resolution enhances brand trust and customer loyalty.

Employee Theft

A junior employee is caught stealing office stationery. It’s his first offence.

What’s the best decision?

A. Terminate immediately.

B. Give a written warning and counsel him.

C. Ignore it.

D. Report to police.

E. Deduct salary.

B

Proportionate response allows learning while enforcing discipline.

Vendor Delay

A key vendor delays delivery, risking your project deadline.

What’s your best course?

A. Penalize vendor strictly.

B. Communicate expectations and offer a short extension.

C. Replace vendor mid-project.

D. Ignore and hope they recover.

E. Escalate to CEO.

B

Balances accountability with practical problem-solving.

Company Reputation

A social media rumor claims your company exploits workers.

What should you do first?

A. Ignore it.

B. File a defamation suit.

C. Release a factual statement and open investigation.

D. Threaten the poster.

E. Offer hush money.

C

Transparency and fact-checking protect brand credibility.

Sales Forecast Bias

Analytics predicts low sales in a region managed by a newly appointed female manager. Some board members cite this as a reason to replace her.

What should you do?

A. Replace her to avoid risk.

B. Check for model bias and contextual factors.

C. Ignore the data.

D. Transfer her elsewhere.

E. Use the forecast as is.

B

Ethical + analytical—checks for bias before judgment.

Gender Bias

Male employees are often preferred for field assignments citing “safety concerns.”

The best approach

A. Continue current policy.

B. Provide safety measures and equal opportunities.

C. Force all women to travel.

D. Cancel field assignments.

E. Outsource the work.

B

Promotes fairness while addressing safety practically.

Layoff Ethics

Due to recession, you must cut 10% of staff.

What is the most ethical way?

A. Randomly pick employees.

B. Evaluate performance and communicate transparently.

C. Fire the newest hires.

D. Fire those with highest salaries.

E. Ask for voluntary resignations only.

B

Transparent, merit-based decision-making ensures fairness.

Product Pricing

Analytics shows raising prices by 15% will not affect sales significantly. However, the region recently faced a flood crisis.

What’s the best call?

A. Raise prices as suggested.

B. Delay the price hike.

C. Reduce prices temporarily.

D. Ask government for subsidy.

E. Keep price hike secret.

B

Short-term empathy over profit maximization shows ethical leadership.

Environmental Responsibility

Your factory’s waste treatment system fails temporarily, polluting nearby water.

What should you do?

A. Hide it to protect the company image.

B. Report to authorities and fix immediately.

C. Blame the contractor.

D. Delay response till audit.

E. Minimize publicity.

B

Accountability and environmental responsibility take priority.

Data Transparency

Employees worry about being tracked by the analytics tool. Productivity data shows improvement after monitoring.

What should management do?

A. Stop monitoring.

B. Continue without disclosure.

C. Explain benefits and keep transparent policies.

D. Ignore concerns.

E. Punish dissenters.

C

Ethical + performance-oriented; builds trust and productivity.

Academic Integrity

As dean, you discover some faculty leak exam papers to favored students.

What is the best immediate step?

A. Ignore for institutional image.

B. Conduct confidential inquiry and suspend those involved.

C. Cancel exams immediately.

D. Make public accusations.

E. Warn them privately.

B

Ensures fairness while protecting institutional reputation.

Algorithmic Hiring

A recruitment AI rejects candidates from rural backgrounds. HR suspects bias.

Your action?

A. Continue with AI—it’s data-driven.

B. Stop using AI immediately.

C. Audit algorithm for fairness.

D. Replace all HR staff.

E. Ignore concerns.

C

Addresses bias systematically—ethical and data-oriented.

Corporate Social Responsibility

Your firm can sponsor an expensive sports event or fund local schools.

What should you choose?

A. Sports event — higher visibility.

B. Schools — long-term community impact.

C. None — retain profits.

D. Divide funds equally.

E. Ask employees to vote.

B

Aligns CSR with sustainable social development goals.

Employee Recognition

You can recognize one out of three deserving employees

What’s the fairest approach?

A. Pick your favorite.

B. Use transparent performance metrics.

C. Ask team to vote.

D. Recognize none to avoid bias.

E. Alternate recognition next month.

B

Objective criteria ensure fairness and morale

Productivity vs Well-being

Data shows longer shifts increase output, but employee burnout rises sharply.

What should management do?

A. Enforce long shifts.

B. Hire more staff to reduce hours.

C. Keep shifts but offer incentives.

D. Cancel the analytics plan.

E. Rotate tasks intelligently.

E

Smart analytics application + ethical balance

Ethical Dilemmas

Morality, fairness, and value-based judgment.

• Choosing between profit and ethics.
• Handling conflicts of interest.
• Reporting misconduct or maintaining loyalty.

Integrity, fairness, long-term perspective.

Business & Managerial Decisions

Profitability, strategy, and stakeholder management.

• Pricing, production, or resource allocation decisions.
• Trade-offs between short-term and long-term goals.
• Employee management and client relations

Strategic thinking, situational analysis, organizational perspective

People Management / HR Scenarios

Interpersonal issues, leadership, and motivation.

• Handling conflicts between team members.
• Balancing fairness and organizational needs.
• Dealing with underperforming employees.

Emotional intelligence, communication, fairness.

Policy & Governance Decisions

Rules, procedures, and system-level thinking.

• Implementing policies affecting multiple stakeholders.
• Dealing with bureaucratic or regulatory constraints.

Policy analysis, equity, consistency, fairness.

Resource Allocation / Data-based Decisions

Logical reasoning using limited or numerical data.

• Dividing resources or budgets among projects.
• Choosing between competing proposals using data.

Analytical reasoning, quantitative logic, prioritization.

Stakeholder Conflict Situations

Managing multiple interests (employees, customers, shareholders, society).

• Balancing ethical and business obligations.
• Handling crises with conflicting stakeholder expectations.

Holistic thinking, compromise, negotiation.

Personal Judgment & Leadership Questions

Leadership style and decision-making under pressure.

• Crisis management or emergency decisions.
• Trade-offs between authority and empathy.

Leadership judgment, long-term vision, ethical reasoning.