I had once been told to double( or triple) the cost of the material and then I had the same thought as some of you.....the time involved has nothing to do with the cost of the raw material. I don't think anyone ever really gets a fair rate when they make something by hand......no matter what the craft. So I say price it so that you feel it is fair to you....if they don't want to pay your price don't feel bad and don't let it hurt your feelings.
If they say they know where they can get it cheaper....say "fine get it there"....and
to all the other comments that people can sometimes make....just say., "this is where you can get the pattern and yarn....that way you can either make your own or have someone else knit it for you."
I think the key isto price it so that it you are happy when you knit it and that once it becomes a chore to knit.....you should stop knitting.