as others suggested, try out different ammo types and brands. every rifle is different and accuracy can vary from one ammo to another.
your group size isn't bad, not great, but not bad. more time spent shooting will help your groups also. practice, practice and paractice some more. that's the great thing about a 22 rimfire is the cheapness of shooting them. the more you shoot, the better you will get.
the 10/22 that i just got finished mounting a scope on for a friend, after i got it sighted in, will easily do a 1" group at 50 yrds with just cheap Remington bulk ammo. and the scope is just a cheap Simmons 3-9x40 that i picked up at WalMart.