CrossRoads:
Yup
$2.43
http://www.digikey.com/product-detail/en/ATMEGA168A-AU/ATMEGA168A-AU-ND/2271188
Same at mouser
http://www.mouser.com/ProductDetail/Atmel/ATMEGA168A-AU/?qs=sGAEpiMZZMvqv2n3s2xjse40PngS4U1xVADwi5G8n9Y%3D
$1.36 in the quantities he is talking about if this makes it to production. Atmel prices their product pretty darn reasonable if you ask me.