13.1 Ronald's trading business operates from a shop in a large city centre. Extracts from Ronald's most recent profit and loss accounts for 20X4 and 20X3 show the following key figures:

20X4 20X3

£

£

Sales 110450 95 544 Cost of sales

(72 058)

(62 075)

Gross profit 38392 33 469 Ronald belongs to a trade association that has recently carried out a confidential survey of its members. The survey found that between 20X3 and 20X4 the average increases in sales and gross profitability of the membership were;
• increase in sales = 12.6%
• increase in gross profit = 15.2%.
Which of the following is correct? A horizontal analysis of Ronald's sales and gross profit figures shows:

a) Higher than average increase in sales, and lower than average increase in gross profit.

b) Lower than average increase in sales, and lower than average increase in gross profit.

c) Lower than average increase in sales, and higher than average increase in gross profit.

d) Higher than average increase in sales, and lower than average increase in gross profit.