I have my prices set at $8.50 for most of my products and a few things that take more cord, are set at $11.25 and that includes 8% for tax as well as 3% for credit card processing. Then if I have to ship, I have a flat rate set for US and one for International... I just have to figure out pricing for the dog collars, and lanyards I adding to the list.
So yes, I would agree that your prices are quite low for a custom, hand made product... I may also use the idea for free shipping over a certain purchase amount, though like you, most of my sales so far have been in person, so shipping did not apply.