To price products, you must become completely familiar with pricing structures, including the difference between margin and markup. Every product should be priced to cover its production or wholesale cost, freight charges, a proportionate share of overhead (fixed and variable operating expenses), and a reasonable profit. Such factors as high overhead, unpredictable insurance rates, shrinkage (theft, shippers' mistakes), seasonality, shifts in wholesale or raw material product costs, freight expenses, and sales or discounts will all affect the final pricing.

Excerpted from Starting a Home-based Business