8.1 Ronald’s trading business operates from a shop in a large city centre. Extracts from Ronald’s most recent statements of profit or loss for 20X2 and 20X1 show the following key figures:

20X2 20X1

£ £

Revenue 110,450 95,544 Cost of sales (72,058) (62,075)

Gross profit 38,392 33,469 Ronald belongs to a trade association which has recently carried out a confidential survey of its members.

The survey found that between 20X1 and 20X2 the average increases in revenue and gross profitability of the membership were:

Increase in revenue 12.6%

Increase in gross profit 15.2%

Which of the following statements is correct? A horizontal analysis of Ronald’s revenue and gross profit figures shows:

a) higher than average increase in revenue, and lower than average increase in gross profit.

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

c) lower than average increase in revenue, and higher than average increase in gross profit.

d) higher than average increase in revenue, and lower than average increase in gross profit.