If you google "How to price handmade knitted items", you will garner over 6 million results. "How to price handmade crocheted items" nets over 500,000 results. Needless to say, it's a fairly hot topic in our little niche.
I've seen basic and complex mathematical formulas for computing price. The most basic formula for non-commissioned items is:
(cost of materials plus 40%) + (hours of labor x $10/hour) = Sales price.
So, let's breakdown that formula using a crocheted dishcloth. Using 1 ball of inexpensive kitchen cotton bought at retail price is $1.29 where I live and it takes me about an 1-1/2 hours of focused crochet to produce a simple square in single crochet stitch large enough to serve as a dishcloth. The sales price of this dishcloth would be $16.81.
Pros: This is a tough dishcloth that will most likely not need replacing for years.
Cons: Wet cotton gets that sour smell pretty quickly when left hung over the side of the sink to dry. Using a bamboo/cotton blend yarn instead of 100% cotton yields a dishcloth with way less stinky-funk to it, but bumps the price to $19.20
There are several problems with the above formula. If you sell online or accept credit cards for payment, it doesn't account for the ecommerce or merchant charges. It also ignores time spent packaging and cost of packaging the item once it's sold. My biggest complaint with the basic formula above is that it doesn't take into account the time and funds you've spent acquiring the skillset required to crochet (or knit, or spin, or felt, etc) your item. If you take a group class at a local chain store, it's gonna run you about $15 for a 60-minute class where you will learn the basic stitches. Only a rare few people will go from initial class to skilled enough to provide an item for sale without hours of additional practice. So add in packaging costs and time, education costs and merchant/ecommerce fees and you now have a dishcloth that exceeds $20.00. That's a pricey dishcloth. I don't know about you but I don't have the disposable income required to buy a set of dishcloths that's over $100.
The same pricing issues occur for:
Women's adult size small sweater made from merino wool yarn- $358
Women's average length scarf made from merino/silk blend yarn- $112
Beanie cap made from merino wool - $61
And that's not taking into account the much more complex skillset required for the above items...
To be continued.... in the meantime I'd love to hear why you choose handmade over industrial made items!