It's hard to actually say what LEGO's actual production costs were for this set and what there expected sales volume is. As anything in business those two things are going to set a floor on the initial price. We have gotten very use to very low LEGO set prices simply because of the way LEGO sets are built from primarily commodity pieces. These commodity pieces have low production costs. What actually ends up determining the price floor for most newer sets is the number of new or unique pieces that must be designed and created. The bulk of that is in production tooling. Injection molds for a part that might individually sell for $0.20 cost pretty much the same as an injection mold for a piece that would cost $2. LEGO wants to recoup that tooling cost as quickly as possible and if the piece will only be offered in a limited number of sets, that cost will be spread out over the planned production run of those sets.
The math is pretty simple once you've factored all normal production costs, packaging, plastic, product design, packaging design, what is going to affect the price of these sets the most is licensing costs and those tooling costs depending on the number of new and unique pieces. It's hard for me to say how many new and unique pieces are actually in this set. I think I see a few new molds and I'm almost certain there are several pieces in new colors.
In the end LEGO is a business and they are trying get people to trade money for little injection molded pieces of plastic. I personally wouldn't buy this set, I like LOTR and LEGO but it's nothing that get me excited. Maybe as a kid I might have wanted it but it would have been far outside my parent's budget. But this set like many is really made for AFOLs with disposable income. I can hardly blame someone for engaging in a hobby that they enjoy and if you look at it that way, $500 is a reasonable price to pay for several hours of entertainment of putting the thing together and something you can physically hold when you are done. I mean tickets to a 2 hour concert are more than this and you don't even get to take Taylor Swift home and put her on your shelf.
