This is a question I get asked a lot, in my case the buyer only sees the $1.10 stamp, but for me there is also the carding and zip lock bag or plastic box for fragile items, paper bag, bubble wrap, envelopes, printing costs (have you seen the price of printer cartridges lately), a cd box (they're cheaper than padded bags), and the $2.80 for registered post because if you don't and the parcel gets lost then Paypal just take it all out of your account again. On top of that, there are the overheads of driving to the post office, and what price can you put on standing in those queues for half an hour or more.
As a seller there are more and more hoops to jump through and unfortunately the costs of handling are usually far greater than the actual postage cost.
Cheer up, postage charges are due to go up again shortly, who knows what we'll have to pay then........at least you didn't get charged $34 per item as I did from Hong Kong. Explains why the items were so cheap, but we aren't allowed to play that game., wouldn't want to anyway