after reading through all the posts and comments on this subject...you're ALL correct!!! I started selling quilts this year. I am constantly making something, and got to the point that I had nobody to give them to. I could donate them to the guild I belong to, but most of what I make are baby quilts, and they can only handle so many of those before they've had enough.
regardless of what I spend on fabric, I price the "ingredients" of my quilt at the going regular price. this way, if I am able to buy some on clearance at a quilt shop, I'm still charging the full regular price and making a little extra off it. this is in addition to labor, quilting, etc.
I do kind of price my quilts at what I would pay for one, but I know what goes into one as I make them. I don't feel I sell myself short by any means, and am making way more than just covering the cost of materials.
I don't plan to support my family with this business by any means as quilts don't sell very quickly due to the price of them. (unless for some reason business takes off sometime in the near future) It's more of a justification of buying fabric, thread, machines (yes plural...how many of us here has only one), etc. this way, I can feed my need to create with fabric and have it pay for itself at the same time.
I think we ALL have an obligation to our craft/art...to educate people about what truly goes into what we create and what doesn't go into the 39.99 knock-offs.
thanks for reading...