Nicely, tell her fabric is expensive, inform her how much fabric would be required to make the item, and suggest she go to the local fabric store and check out the price of fabric per yard. Then tell her that it will take you X number of hours to piece and quilt the runner and that if you just charged for the fabric plus minimum wage for your work, the cost of the runner would exceed the $12.00 amount. End the conversation with a statement explaining that you do quality work, that you are an expert at your craft and that an expert at any job is paid more than minimum wage. If she gets huffy, you should add that if she wants something at garge sale prices, she needs to go to a garage sale.