B2 M&M Wheels is a multi-national company, which manufactures a range of bicycles, selling them direct to customers via its website. For the last two years the company has shown a turnover of around 400,000 per annum, though costs have been rising with inflationary pressures. M&M Wheels is structured along functional lines and has been utilising an incremental budgeting system. The budget is prepared by the senior management team, with no other staff involved in the budget-setting process. Each member of the senior management team has enjoyed an annual bonus of between 10% and 20% of their salary for each of the past four years. The annual bonuses are calculated by comparing the actual costs attributed to a particular function with budgeted costs for that function during the previous financial year. A new Finance Director, who previously held a board level position in a large manufacturing organisation, has recently been appointed. In her previous role, she had been responsible for the implementation of a zero-based budgeting approach which proved highly successful and improved profitability. (a) Distinguish between the existing system of incremental budgeting and the proposed zero-based budgeting approach favoured by the new Finance Director. (b) Identify and discuss the factors to be considered when implementing a system of zero-based budgeting within M&M Wheels. () Describe the need for transfer pricing systems and explain the factors that should be considered when setting transfer prices for national and multinational transactions. [4] [ 6 ] [10]