$500 for postage is very unreasonable cost for $20 item but please keep in mind that it is not only postage cost, it is Shipping and Handling.

There may be an item that requires to be packed in a secure way, may be a seller needs to build a wooden crate or even a box for it.

That may take a lot of time and material. 

I pack my big products on an MDF panels and wrap them in a few layers of cardboard. Only material cost for some of them can be up to $10 not to mention that it can take 10-30 minutes to pack. Would it be unreasonable if I charged extra $10 for packing?

And yet I charge only $3-4 for packing no mater if I can pack it in a stock box or in custom made packing.