Absorption costing is defined as a method that includes all production costs, such as direct labor, indirect labor, variable overhead, and fixed overhead. This approach is also called the full cost approach. Nowadays, many companies use the absorption costing method for external financial reporting purposes, the matching concept is used in absorption costing. Assets like inventory impact a company's ability to make more profits, so in accounting it's important to match expenses with the revenue they produce. Additionally, the matching concept requires the company to record all expenses that match revenue with the company's demonstrated profitability in 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 included directly in the Cost of Goods Sold account as an expense shown on the income statement, and the rest of the fixed manufacturing overhead that has not been sold will go into the inventory account instead of the count. as expenses. Therefore, the concept of matching is the basis of absorption costing because these expenses should match the revenue generated from the sale of that inventory. One of the advantages of the absorption costing method is that when not all fixed products heard are sold during the accounting period, the fixed manufacturing overhead cost will go to inventory as a resource rather than as an expense. Therefore, charges will accrue only if the company actually sells the items in stock. Therefore, the company can improve its profits for the period. According to this, illusory profits mean that more inventory is produced than is sold under the absorption costing method. Higher production will lead to higher fixed manufacturing overhead costs to absorb inventory costs and fewer expenses during a period, so there will be more profit. In reality, the company may not be able to produce that much and managers want to earn more commissions based on the performance of operating income, so they simply accumulate inventory and ignore the expenses of maintaining additional inventory at in order to earn more profit. Therefore, the profit should be considered a phantom profit. According to management accounting textbook, it indicates that break-even analysis with absorption costing method requires both production and sales to analyze it. If the company manipulated the inventory, for example by artificially increasing it or by inducing the retailer to stock more products than the quantity actually demanded by the markets, the company would obtain an illusory profit.