Sales data for the fiscal years 2006, 2007, and 2008 for Bed Bath & Beyond follows (dollars in billions):

200620072008

Sales $6.6$7.0$7.2

According to the financial statements, sales creased by 9 percent from 2006 to 2008. Assume that the general rate of inflation as well as the price increase for Bed Bath & Beyond’s products for the period 2006 to 2008 was percent

REQUIRED:

a. Considering price increases, did sales actually increase by 9 percent from 2006 to 2008? By how much did the company’s sales actually grow from 2006 to 2008? By what percent did sales increase?

b. If prices had increased 10 percent from 2006 to 2008, what would ha been the effect on the growth of sales?

c. Describe how the stable dollar assumption could have misled the users of Bed Bath & Beyond’s financial statements.