eCircuit retractable USB Male-Male 30" cable - $1
2x 3.5mm male jack plugs - $3.99 @ RadioShack (ouch!)
In total, the project cost me $4.99, but it could have been $2-$3 if it weren't for RS' inflated prices.
Step 1: Cut usb cable
Make sure the cable can't retract while working.
Leave enough on the ends to be able to reuse the connectors.