Build the cost of one finished item
Include materials and production labor in manufacturing cost. Add the packaging used for that item and any freight you allocate to it. Handmade products still have a labor cost even when you make them yourself. Use a consistent allowance rather than assuming your time is free.
Translate Etsy fees into the calculator
Use the percentage fee field for charges that share the same base as your entered selling price, and the fixed fee field for applicable per-unit charges. Etsy fee bases can include shipping or other amounts, and fees vary by seller location and circumstances. When the bases differ, calculate the total fee for the order separately and enter it as a fixed dollar amount with the percentage field set to zero. Do not count it twice.
Handle shipping carefully
For a simple estimate with free shipping, enter the item price and put your shipping cost under fulfillment. If the buyer pays shipping separately, use total pre-tax revenue allocated to the unit and include the actual shipping expense. A multi-item order needs a consistent per-unit allocation for postage and order-level charges.
An illustrative pricing check
Suppose a product brings in $25 before tax. Manufacturing is $6, packaging $1, shipping $5, total applicable fees $3 and advertising $2. With no other costs, contribution is $8 and margin is 32%. This example uses an assumed total fee, not a published Etsy rate. Overhead, returns and income tax may reduce what you keep.
Check the current official source: Etsy fees and payments policy.