From a personal point of view, I make & sell for the enjoyment of making. Also, being a busy mum it means I can retain an identity other than "just mum".
(It also sets a good example for my children to see that mum works too.)
I don't really sell to make a profit per se. The way I work is I sell rice writing jewellery as my specialisation. The moneys earned from those sales goes to buy silver etc, so that I can indulge in my love for making with silver.
When I sell on my silver, I normally follow "warehouse rules" - 2 and half times what you bought the item in for. The idea behind it is the first half replaces your cost for materials, the second half is the profit, and the quarter is to pay tax. In reality, its first half pays the material costs, second half pays the tax and the quarter is the profit.
Everyone has their own ways of setting prices and to be fair, the seller should really know their customer base =)