Absorption costing is defined as a method that includes all manufacturing costs, such as direct labor, labor indirect labor, variable overheads and fixed overheads. This approach is also called the full cost approach. Today, many companies use absorption costing for external financial reporting purposes. The concept of matching is used in calculating absorption costing. Assets such as inventory affect the company's ability to earn more profits. It is therefore important, in the accounting field, to match expenses with the income they generate. Additionally, the matching concept requires the company to record all expenses that match its revenue to the company's demonstrated profitability during the specific accounting period. Under absorption costing, fixed manufacturing overhead costs are determined by each unit of production. Additionally, when a unit of fixed manufacturing overhead is sold, it will be directly included in the cost of goods sold account as an expense shown in the income statement and the remainder of the fixed manufacturing overhead that does not have not been sold will go to the inventory account instead of being counted. as expenses. Therefore, the concept of matching underlies the calculation of absorption costing, because these expenses must match the revenue generated from the sale of that inventory. One of the advantages of the absorption costing method is that when all the fixed products manufactured are not sold during the accounting period, the fixed manufacturing overhead cost will be allocated to inventory as as an asset rather than an expense. Therefore, expenses will only be recognized if the business actually sells the inventory items. Thus, the company can improve its profits for the period. According to this, illusory profits mean that more inventory is produced than is sold under absorption costing. More production will result in more fixed manufacturing overheads going towards inventory absorption and less expenses in a period, so there will be more profit. In reality, the company may not be able to produce as much and managers want to earn more commissions based on operating profit performance. So they just accumulate inventory and ignore the expenses of maintaining additional inventory in order to earn more profit. The profit must therefore be considered as a phantom profit. According to the management accounting textbook, it states that break-even analysis under absorption costing requires both production and sales to analyze it. If the company manipulates inventory, for example by artificially increasing inventory or seducing the reseller into stocking more products than the quantity actually demanded by the markets, the company will make an illusory profit..