The crafting skills Bowyer, Smithing and Gunsmithing allow the creation of their respective items if you have the required materials and are in a suitable location. (Bowyer: Bows and Slings; Smithing: Melee Weapons, Armor and Thrown weapons; Gunsmithing: Guns respectively. Bowyers require a Portable Toolkit, Smiths require a forge, and Gunsmiths require a gunbench.)

Items have 6 quality levels - in increasing order: destroyed, broken, worn, average, good, pristine
Each quality level above average adds +5% to hit or +1 to each soak value
Each quality level below average subtracts 5/10/15% to hit or removes 1 to each soak value, minimum of 0

With the first level of a smith skill, you can create items up to Average Quality and repair that class of items up to Average at a reduced cost. With the Master level of the respective smith skill, you can craft and repair up to Pristine Quality, at a further reduced cost.
All recipes have an additional XP bonus and AP cost based on the item crafted.

AP Cost and Experience

AP cost for crafting is 6*quality level up to average with basic Crafting skills or 4*quality level with advanced Crafting skills + a base amount depending on the item crafted.
XP gained is 12*quality level + a different base amount depending on the item (twice the base AP).

AP cost and XP return for crafting and repairing
Action		AP cost with skill			XP reward
Action		Repair Item only	Bowyer, Smithing or Gunsmith	Master Bowyer, Mastersmith or Master Gunsmith	XP reward
Repair	up to good, per step	10	7	5	10
Repair	from good to pristine	-	-	8	10
Craft Item	destroyed	-	ap base+6	ap base+4	xp base+12
	broken	-	ap base+12	ap base+8	xp base+24
	worn	-	ap base+18	ap base+12	xp base+36
	average	-	ap base+24	ap base+16	xp base+48
	good	-	-	ap base+20	xp base+60
	pristine	-	-	ap base+24	xp base+72
Craft Ammo	bullets or arrows	-	5	5	0

It is more efficient to craft items at their desired quality than to craft damaged items and repair them, unless one is seeking to do repairs for their own sake for the pursuit of Badges.