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Med-Tech engineers are trying to improve the design of a pump shaft that has an outer diameter specification of 13 inches with a tolerance of ± 0.003 inch. Available inspection data from the past year indicate that the mean value of the diameter has been 13.001 with a standard deviation of 0.0025 inch. The gear sells for $125. The estimated loss to society is $20 for any gear that has a diameter at the upper or lower tolerance limit. Annual sales of the gear amount to 40,000 units.
What is the expected loss per year?
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