Well, my way is probably crap for custom battle or multiplayer but what I did was...

a crappy region with a town of 1800 population and no real trade gives about 600 income.

So i made the cheapest garrison unit cost 600 with an upkeep of 300 as my baseline cost. I then ranked faction units according to the barracks level they were built at and added 200 cost and 100 upkeep for each rank with an extra 200 for cavalry.

(Sophisticated system huh )

The point of my system isn't to make the cost an accurate reflection of the unit's capabilities but to make the AI produce armies that make sense for the faction. Plus i don't care if a faction has a better unit for the same cost if historically they had an advantage in that area. e.g the numidian light cav is better than, but costs the same as, everyone else's javelin cavalry.

Needs tweaking obviously but as a base system it is working quite well with the AI producing armies that "fit".

Also your base cost needs to reflect how much you like having lots of full stacks in the game. I prefer everyone having fewer, smaller armies and so my costing is quite extreme to make all the factions struggle to pay for their garrisons.