The formula jason_kraft (a forum member here with a LOT of good management and legal information) recommends is linked in his signature, http://jasonkraftblog.wordpress.com/2013/05/14/the-magic-pricing-formula/ . I've also read that 3 times material cost usually runs similar to that for cake.
She would not expect to pay only $2 a slice for cake in a restaurant, nor would the restaurant cake be decorated like that. How many hours do you expect it to take you to make? What do you think your expenses would be? $300 minus expenses divided by hours is your hourly rate. Would you work for that? Is it worth the time away from your son?
If you wish to do the cake within her budget (which is too low for what she is asking for), some ideas I would have for lowering expenses might be:
Fewer servings. Perhaps she could invite fewer than 150 people.
Does she own (or can borrow) items that could be used in decorating? With a barrier between the item and the cake or arranged around the cake on the table. I've seen decorative shoe statues. Does someone in the family sew and have a dress maker's dummy? It would be draped with jewelry.
Fewer decorations on the cake. She listed a lot of items.