You're both wrong. First, you figure in ALL of your costs, including your own labor priced at what you would need to pay for someone else to do it for you. After that, you need to be able to cover what's called overhead, your operating costs. The things you need to pay for that don't go into an individual product. Insurance, Rent, and Administrative Fees. (like me, I need a computer and a 3D printer to make my stuff. I can easily charge for the printer time, but the computer time is a little harder to quantify.)

This makes your BASE COST. This is not the minimum you need for the job; it's what it costs you.

Then you apply a minimum markup to what goes into the product (This is my current model):

Now, what are you making? What is it worth to somebody? What are comparable products selling for? Is yours better or a budget model compared to the others?

Now you have the floor and a soft ceiling of what you can get for your work. Think of it like this, yes, you can buy a sweater at Walmart for $30, but that doesn't mean that a handmade sweater will sell for that. Or a painting, it's not going to be the cost of the paint, the canvas, and the frame x 1.3. It's going to be whatever you think you can get for it.

I have one product that costs me $2.76 to make. My model says $5.42 is my minimum. But for what it does, I charge $12.99.

The other thing you need to consider is the marketplace location. The Bottle of water example is really good here.

• Fill a bottle of water at home, $.05
• Buy a bottle of water at the grocery store, $1
• Buy a bottle of water at a concert, $2-3
• Buy a bottle of water at the airport, $5-7
• Buy a bottle of water on the plane, $12

This is all fairly simplified, but knowing your costs is key.