$2.88 total

$0.42 per CD-R
$0.42 per CD label
$0.12 per CD sleeve
$0.42 per CD mailer
$1.11 shipping & handling

$2.50 subtotal for materials

$0.0725 per Paypal transaction fee (2.9%)
$0.30 flat fee per Paypal transaction

$2.88 cost, not for profit