Buying division perspective
  The maximum transfer price acceptable to the buying division will be the lower of:
  ▼External market price(if an external market exists);
  ▼The net revenue of the buying division.
  The net revenue of the buying division means the ultimate selling price of the goods/ services sold by the buying division,less the costs incurred by the buying division.
  Illustration
  The bottling division of a large soft drinks manufacturer buys special syrup,made according to a secret recipe,from the syrup division.The bottling division adds carbonated water to the syrup to make the drink,bottles the drink,and sells it to the distributors.
  Each bottle is sold for 50¢。The bottling division has calculated that the costs of making the drink and bottling it(excluding the cost of buying the syrup) are 20¢per bottle.The net revenue of the bottling division is therefore 30¢per bottle.
  If the syrup division were to propose a transfer price in excess of 30¢per bottle for the syrup,the bottling division would make a loss.