1. Learn skills for:

• Refinery
  Effective resourses usage
  Amounts of items produced per cycle (with every cycle CT becomes worse)

2. Use lvl 2 production.
Go find the outposts with lvl2 factories or go to the new islands, they have all lvl2 production facilities. It will cost you less on money and time.

PS Prototyping is needed for creating CTs for Tier 2-4 items. For T1 its just waste of materials.

This works if you don't factor in your materials, as you said.
You could however just be selling materials and you should factor in the cost of those.

Production is probably one of the most complicated activites in the game, and requires a fair number of extensions to be consitently profitable, as well as being a very competitive activity.

Production has (3) cost centers;

Engineering
Factory
Marketing

Engineering costs are; Template Item(s), Decoder, and Reverse Engineering run cost
Factory costs are; Commondities(Materials), Factory run cost
Marketing; Sell fee, tax costs

The tax and sell extensions are self-explanitory, the higher the level, the less your overhead. There isn't much you can do about the engineering costs, you can speed them up with extensions however (and Annihilator mentioned that faster is cheaper, so you can save some cost that way after spending EP in factory).

While you don't factor in the cost of material, its going to be your largest investment, which you do realize as it promted you to get the level 4 encoder. However, you can gain a lot of material efficiency with cheap extensions which gives you some leeway to purchase a level 3 if you can't find a reasonably priced level 4.

Skills to get to (5) EP values are estimated (assumes all Indy character)

EP:855-Basic Extensive Mass Production - 1line/level = 6 lines per factory
EP:684-Basic Efficient Mass Production - 2%/level = 10% less material cost
EP:6,272-Intensive Mass Production - 1Item/Cycle = 6 items per cycle

EP:1,197-(level 2)Programmed Mass Production - 1 Cycle/Level = 3 Cycles
EP:2,565-Advanced Efficient Mass Production - 2%/Level = 10% less material cost
EP:2,565-Expert Efficient Mass Production - 2%/Level = 10% less material cost

Total EP- 14,138

If you are starting with raw materials, you should also get this extension as high as possible (there is only 1 that concerns refining)

EP:12,483 (level 10) Refining - 3%/Level = 30% more commodity from raw material.

As Lucius mentioned, you should always take the time to do these activites at the level II facilities and get your relation up continually. Each outpost on the alpha-I islands has (2) level-II functions, and transport missions between them. In this way, as you move materials around, take the missions too for NIC and to raise your reputation.

With the above skills;

You can have (6) CT's installed, you can have (6) items per cycle, and be able to program (3) Cycles with 30% less material cost.

If you had the material, and wanted to have all the same CT's installed, you could create 6*6*3 = 108,000 rounds overnight.

Or 18,000 rounds of 6 different ammo/charges.

Making 2-3,000 rounds at a time may be profitable, but you lose out in the NIC/HOUR calcuation.

This is why being a vertically integrated solo player doesn't pay off for many-many months. While 14K of EP isn't alot, most indy players are also spending lots of EP on mining, and another 12k to convert the raw materials, and then the marketing EP to sell it.

Ideally, you want to concentrate on either mining or production first, then when you get proficient, cross train over; note that you eventually want to get greater then level 5 on those extensions, but I would call that level proficient, while anything above that is expert.