Now we know why it is so cheap, Google are selling it cost !

http://www.theverge.com/2012/6/28/3122811/nexus-7-manufacturing-cost-design-time

"When it gets sold through the Play store," says Rubin, "there's no margin, it just basically gets (sold) through."

Sounds like a plan. Last time I looked Google were making a tiny amount of ads and services for each Android device (and making more on iOS devices).

When asked if he thinks this cost structure will make life difficult for other Android manufacturers to sell tablets, Rubin insisted there is "plenty of room left for Android tablet innovation."

Yeah, right. Not only have they screwed their partners, they've also screwed their own hardware arm, Motorola.
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Remind me to change my signature to something more interesting someday