Masterwork
The masterwork rules are added primarily to compensate that it's so hard to get magical weapons, but also because there really are very large differences in worksmanship quality with weapons. I'd assume that the average weapon in DnD world is pretty good, and MW is as good as it gets. In Hökaland, a regular weapon is decent/low quality compared to average DnD and there are levels of improvements to be made.
Like "normal" masterwork quality, these prices are in addition to the cost of the original weapon/armor cost. If a character has access to enchanting, only Masterwork I is needed to make enchantments.
Improvements
This is more of a game mechanic function rather than an adaptation of something that actually happens in Hökaland; Masterwork items can have their quality level improved. The cost is simply the difference between the current level and the new level.
Especially for weapons, this is of course not very realistic, but the for roleplaying purposes it can be seen as selling the original item and ordering a new one. For armor, it could very well be an improvement.
Masterwork quality increase and magical enhancement can be improved in parallel.
Prices
The prices are based on the original masterwork cost and made similar to magic enhancement base cost. The quality level is multiplicated with itself and then multiplied by 300 (for weapons) or 150 (for armor).
While a +2 equivalent bonus here is slightly more expensive than a base cost magic enhancement of +2, it adds a +2 bonus outside of the exponentially increasing cost of magical items.
Weapons
(lvl * lvl * 300)
- Masterwork I - 300gp - +1 to attack roll, enchantable and improvable.
- Masterwork II - 1200gp - +1 to attack and damage roll.
- Masterwork III - 2700gp - Cumulative with enchantment bonuses, +1 hardness, +10 hit points.
- Masterwork IV - 4800gp - +2 to attack roll, +1 to damage roll.
- Masterwork V - 7500gp - +2 to attack and damage roll.
- Masterwork VI - 10800gp - Cumulative with enchantment bonuses, +1 hardness, +10 hit points.
Armor
(lvl * lvl 150)
- Masterwork I - 150gp - Armor check penalty -1, enchantable and improvable.
- Masterwork II - 600gp - +1 to AC.
- Masterwork III - 1350gp - Cumulative with enchantment bonuses, +1 hardness, +5 hit points.
- Masterwork IV - 2400gp - +1 hardness, +5 hit points.
- Masterwork V - 3750gp - +2 to AC.
- Masterwork VI - 5400gp - Cumulative with enchantment bonuses, +2 hardness, +10 hit points.
These non-magical enhancement bonuses stack with Damage Conversion.