The endpoint log entry shows that a new account named "admin" has been created on a Windows system with a local group membership of "Administrators". This indicates that a new account has been introduced on the system with administrative privileges. This could be a sign of malicious activity, such as privilege escalation or backdoor creation, by an attacker who has compromised the system.

DNS exfiltration is a technique that uses the DNS protocol to transfer data from a compromised network or device to an attacker-controlled server. DNS exfiltration can bypass firewall rules and security products that do not inspect DNS traffic. The characteristics of the suspicious DNS traffic in the question match the indicators of DNS exfiltration, such as:
DNS traffic while a tunneling session is active: This implies that the DNS protocol is being used to create a covert channel for data transfer.
The mean time between queries is less than one second: This implies that the DNS queries are being sent at a high frequency to maximize the amount of data transferred.
The average query length exceeds 100 characters: This implies that the DNS queries are encoding large amounts of data in the subdomains or other fields of the DNS packets.
Official Reference:
https://partners.comptia.org/docs/default-source/resources/comptia-cysa-cs0-002-exam-objectives
https://resources.infosecinstitute.com/topic/bypassing-security-products-via-dns-data-exfiltration/
https://www.reddit.com/r/CompTIA/comments/nvjuzt/dns_exfiltration_explanation/

The most likely explanation for this traffic pattern is C2 beaconing activity. C2 stands for command and control, which is a phase of the Cyber Kill Chain that involves the adversary attempting to establish communication with a successfully exploited target. C2 beaconing activity is a type of network traffic that indicates a compromised system is sending periodic messages or signals to an attacker's system using various protocols, such as HTTP(S), DNS, ICMP, or UDP. C2 beaconing activity can enable the attacker to remotely control or manipulate the target system or network using various methods, such as malware callbacks, backdoors, botnets, or covert channels.

An incident response plan is a set of predefined procedures and guidelines that an organization follows when faced with a security breach or attack. An incident response plan helps to ensure that the organization can quickly and effectively contain, analyze, eradicate, and recover from the incident, as well as prevent or minimize the damage and impact to the business operations, reputation, and customers. An incident response plan also defines the roles and responsibilities of the incident response team, the communication channels and protocols, the escalation and reporting procedures, and the tools and resources available for the incident response.
By following the company's incident response plan, the administrator can ensure that they are following the best practices and standards for handling a security incident, and that they are coordinating and collaborating with the relevant stakeholders and authorities. Following the company's incident response plan can also help to avoid or reduce any legal, regulatory, or contractual liabilities or penalties that may arise from the incident.
The other options are not as effective or appropriate as following the company's incident response plan. Informing the internal incident response team (A) is a good step, but it should be done according to the company's incident response plan, which may specify who, when, how, and what to report. Reviewing the lessons learned for the best approach is a good step, but it should be done after the incident has been resolved and closed, not during the active response phase. Determining when the access started (D) is a good step, but it should be done as part of the analysis phase of the incident response plan, not before following the plan.