When I started considering pricing, I deliberately ignored the market at first. I made spreadsheets for frosting, cake, fondant, specialty items, boards, supports, and boxes, and overhead. Everything that goes into one cake, I listed on spreadsheets.
From there I spent one really long day running around getting prices for everything. I put that into the spreadsheets and then calculated things like 1 t. of vanilla is 1/4 of a bottle (just an example, I don't know off-hand the exact percentage) and created formulas in the spreadsheet so that when I am pricing a cake, I can put in 1 in the amount column and the price column will calculate the cost automatically. From there, I created one last spreadsheet that pulls the totals from the others to calculate the final cost of the cake.
Since I work from home, I used my last job income as my labor cost. To me, it doesn't matter if I make 20, 30, 40 dollars an hour, as long as I could make as much as my last job per hour without the hassle of dealing with "the man." Not very professional, but it works for me right now.
Once all that was done, I started my market research. I looked at what everyone else around me is charging, what products they offered, their location, their overhead, and their branding. I looked at industry report, and I looked at the average costs of weddings and such in my area. I did not want to do this part first because I didn't want to subconsciously influence the numbers in my spreadsheet.
Still, my pricing was not finalized. I had to consider who were the most likely to buy my product. What is their income? What do they typically spend on custom items, on weddings, etc...? Is there a niche market I can fill? On and on and on, I considered and researched such things. I was lucky because I was also in college at that time and my college required a lot of team work and projects. Many classes required you to pick a type of business for the project. The other students didn't care what type we picked so I led them in the cake/party planning/catering direction.
My business plan, marketing plan, PR plan, etc... for college all worked into my own plans for a cake business.
I also feel very lucky to have gotten that education as it has gone a long way towards preparing me to be a business owner. I cannot imagine even starting this process without that knowledge.
See how complicated the pricing question can be? This is why I don't participate in those threads. There are so many variables that go into it. Each area is different and for me to give an intelligent answer would require months of research.
Now I just have to keep up with price changes. Good grief, the ingredient price changes this past year have kept me hopping!