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2 things dictate price of guns. (Or anything else that is made in machine shops)
1st is machining and fabricating materials, time and tooling.
2nd is what the market will bear. That will be the price over and above the cost of the metal and wood, and the machine time.
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You have to factor overhead into the cost of the product. That includes:
Insurance (workman's comp, liability, fire, etc.)
Rent / mortgage
Employee benefits
Maintenance
Marketing / advertising / promotion
Research & design
Product development
Tooling
Fixtures
CNC program development
Machinery
Utilities
Training
Supplies / expendables
Office costs, including personnel and equipment
Accounting
Legal
Janitorial / cleaning / supplies
Maintenance and supplies
Taxes (local, state, federal)
Inventory costs
Cost of money
Machinery / equipment / tools replacement costs
Incidentals
Profit has to include a percentage markup for all of those costs. The cost of a product is more than simply materials and labor.
As an example, for engineering work, the multiplier on my raw hourly rate to cover all of the overhead at an engineering company is 2.75 before profit is added.
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The replacement cost on government contract for an M9 pistol is $263. An M-16A2 is $586. Do you think the US govt is grossly overpaying for a rifle it has a 50 year history with, or that Beretta is selling M9s below cost? Neither. Those prices reflect real costs, not market premiums.
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If the company is smart, they have a completely different overhead structure for government sales or government work. You cannot equate government costs to civilian sector costs.
Again, as an example, the hourly multiplier for my engineering time for government work is 2.12 instead of 2.75 used for commercial work because the cost structure for government work is totally different.
By federal law, the US Government always pays the lowest price. You cannot charge or sell a product at a lower cost or rate than you charge the Federal Government. If you do, and the company is audited by the Defense Contract Auditing Agency (DCAA) - you get to REFUND the overcharge back to the Federal Government plus a penalty if the DCAA decides the penalty is warranted.