As manager of an encoding department in a bank, you are concerned about the amount of time your encoder clerks have to spend cleaning their machines because of malfunctions. You obtained a proposal to modify the design of the machines to reduce the number of malfunctions. The modification will reduce the amount of time spent cleaning the machines by 75 percent. You employ 20 encoder clerks at an average salary of $36,000 for working 2,000 hours per year. To help you decide whether the proposal is worth considering, you had a pilot work sampling study made, which provided the following results:

Activity .................................Observations
Processing checks .......................52
Cleaning machine .......................15
Other duties ................................25
Breaks ............................................8
                                            Total 100
a. Estimate the value of the annual labor savings from modifying the encoding machine design.
b. Construct a 95 percent confidence interval for your estimate. Would you suggest a larger sample size? Why?