I'm not even necessarily talking about products with LEDs. Rather, there's stuff like this:
The ADS1256 costs well over $7 if you buy full reels, yet they're selling a completed board with it and other chips (including an ADR03 voltage reference which goes for about $1.50 in large quantities) for $13.40. Even in large quantities I probably couldn't have that board made for what they're selling it for (and presumably making a profit on).
Didn't take me long to find out I can get the ADR03 in Asia for < $1.10 USD. The ADS1256 looks like I could probably get for $6.50, but lets go with $7.0. $1.00 USD for all the other parts. $0.12 for PCB, $0.25-0.35 to assemble. Cost in CDN$ = $13 - $14 on high end. Let's call it $13.50 with 20 points margin = $16.85 ... (current price is $16.79).