My immediate estimate of that would be 350 plus 300, just as quick and much more accurate than 500!
GMTA - that was the poorest excuse for an estimate I can imagine. The larger skill evident in that example is the ability to do such problems in your head. Better rounding improves accuracy and allows the learner to understand numbers better. This also builds toward such skills as understanding why multiplying a fraction or a decimal by another fraction or decimal achieves an answer that is smaller than the original number.