Negotiated Price Method If excess capacity exists, market price is a good transfer price. Overall Corporation benets from the transfer of product between Selling Division and Buying Division. However, there is no incentive for Buying Division to buy from Selling Division. Buying Division net income will be the same regardless of which supplier it uses. In order to give some incentive for Buying Div ion to buy from Selling Division, a negotiated price may be the best price to use as a transfer price. How this transfer price affects the income of each division depends on the price that is negotiated. When the transfer price is negotiated, there is a maximum price above which Buying Dlvision will not buy. There is also a minimum price below which Selling Division will not sell. The max un1 price is equal to the V The minimum transfer price can be calculated in one of two ways: Minimum Price = Market Price Avoidable Costs. This formula ensures that the selling division is no worse off by selling to another division. When this formula is used, the range for the desirable transfer price is stated as: (Market Price , Avoidable Cost]