"Rifle scope with variable zoom. Factory default zeroed to 200m and manually adjustable to 800m.(Not attachable on the m4a1)" - Taken from http://dayz.gamepedia.com/Long_Range_Scope

This means at default the centre of the crosshairs is where the bullet will hit at 200m. When you use PGUP to increase the zeroing, it just means that the centre of the crosshairs is the bullet impact point at the set range; not the zoom on the scope.

Working as intended, in my opinion.