Final answer:
The true statement about cost accounting is that it is part of both management and financial accounting systems. It provides detailed cost information to assist in managerial decision-making and financial reporting, applicable across various sectors, not just manufacturing.
Step-by-step explanation:
The correct answer to the student's question, 'Which of the following is True of cost accounting?', It is part of both management and financial accounting systems. Cost accounting is indeed a subset of management accounting, and its information is primarily used to aid managers in making decisions. However, elements of cost accounting are also vital in preparing financial statements, which are an essential component of financial accounting. This integration allows for a more comprehensive analysis of costs incurred by a business. Moreover, cost accounting applies to various sectors beyond manufacturing, including service providers and retailers, and aids businesses in understanding the costs associated with producing a product or providing a service.
Understanding accounting profit versus economic profit is crucial in cost accounting. Accounting profit considers total revenue minus explicit costs - the tangible cash transactions. In contrast, economic profit accounts for both explicit and implicit costs, providing a fuller picture of a firm's profitability. These concepts help differentiate between simply covering costs versus achieving a cost-effective operation that enhances economic success.
Additionally, breaking down total costs into categories like fixed cost, marginal cost, average total cost, and average variable cost provides various insights for a firm's financial health and decision-making strategies. Cost accounting thereby plays a critical role in assessing the overall profitability and efficiency of a business.