I don't know if there is a formula for felting. It really depends on the wool and needle size.
As far as size, bigger is better. Every felted pattern I've seen calls for very loose fabric. I don't think tighter felts as well.
Wool has little hairs on it that make the wool stitck to itself and therefore become smaller and more dense. Agitation and hot water make this process happen in a controlled way. Superwash wool and some bleached wool lose these little hairs and don't felt.
A tiny bit of soap is added--not much at all. Items are washed in a washer with hot water and other things, like jeans, to provide agitation. Usually the knitted item is in a net bag or pillowcase to keep it contained and keep some of the lint in.