XAT Decision Making (DM) Short Notes: Syllabus, Unit-wise Weightage and Study Order

    XAT Decision Making (DM): 4 units and 17 chapters, a study order by exam weight and 0 practice questions.

    Units in XAT Decision Making (DM)

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    One Solved Question from Each Decision Making (DM) Chapter

    Question 1 · Decision Making (DM) MCQ

    An event agency is deciding how to compensate a popular speaker.

    Option 1: Fixed Fee of $10,000.

    Option 2: Revenue Share of 40% of ticket sales.

    The venue capacity is 500, and the ticket price is 5,000.

    If the agency is strictly risk-averse and wants to guarantee it does not operate at a loss regardless of the attendance outcome, which compensation model should it choose, and what is the financial outcome in the worst-case scenario?

    1. A.

      Fixed Fee; worst-case loss is $5,000.

    2. B.

      Fixed Fee; worst-case loss is $10,000.

    3. C.

      Revenue Share; worst-case outcome is a profit of $1,000.

    4. D.

      Revenue Share; worst-case outcome is a break-even ($0).

    Correct Answer:

    C

    Step-by-Step Solution

    Key idea: This is a "compensation model risk" question, recognizable because it requires calculating financial outcomes under uncertainty to satisfy a strict risk-aversion constraint.

    Step 1: Identify the worst-case scenario. This is selling only 200 tickets.

    Step 2: Calculate worst-case Revenue. Revenue = 200 tickets * 10,000.

    Step 3: Evaluate Option 1 (Fixed Fee). Total Cost = 5,000 (other fixed) = 10,000 - 5,000. This is a loss, which violates the "no loss" constraint.

    Step 4: Evaluate Option 2 (Revenue Share). Speaker Cost = 40% of 4,000. Total Cost = 5,000 (other fixed) = 10,000 - 1,000.

    Step 5: Conclude. Revenue Share guarantees no loss, and the worst-case outcome is a $1,000 profit.

    Answer: C

    chapter
    XAT Decision Making (DM) Short Notes: Syllabus, Unit-wise Weightage and Study Order

    XAT Decision Making (DM): 4 units and 17 chapters, a study order by exam weight and 0 practice questions.

    A question from this chapter

    Question 1

    An event agency is deciding how to compensate a popular speaker.

    Option 1: Fixed Fee of $10,000.

    Option 2: Revenue Share of 40% of ticket sales.

    The venue capacity is 500, and the ticket price is 5,000.

    If the agency is strictly risk-averse and wants to guarantee it does not operate at a loss regardless of the attendance outcome, which compensation model should it choose, and what is the financial outcome in the worst-case scenario?

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