First of all, don't sell yourself short. I haven't sold anything, but if I ever do I would go about calculating the cost in this manner. First, figure out the cost of the yarn. Second, figure out about how long (i.e. how many hours) it will take you to make. Multiply your length estimate by the $ per hour you want to charge - I would probably start with $10/hour for basic stitches, but go up from there for more complicated things. Add the cost of yarn to the cost of labor for the minimum amount to charge.
However, I agree with brendajos that if this is not something you want to do, don't! No need to give her a price estimate (although something really high would probably make her back off), just tell her you don't want to do something on commission at this time (or some other tactful explanation/excuse as needed). Good luck!