Sales data for the fiscal years 2010, 2011, and 2012 for Bed Bath & Beyond follows (dollars in billions):
According to the financial statements, sales increased by 22 percent from 2010 to 2012. Assume that the general rate of inflation as well as the price increase for Bed Bath & Beyond's products for the period 2010 to 2012 was 4 percent.
a. Considering price increases, did sales actually increase by 22 percent from 2010 to 2012? By how much did the company's sales actually grow from 2010 to 2012? By what percent did sales increase?
b. If prices had increased 10 percent from 2010 to 2012, what would have 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.