How can full absorption costing be abused by management to misstate financial results?

Full absorption costing can be abused by management through the manipulation of inventory levels and production costs. By overproducing inventory, managers can allocate fixed manufacturing overhead to a larger number of units, thereby reducing the cost per unit and inflating net income in the short term. This practice can mislead stakeholders about the company's profitability and operational efficiency, as it defers costs to future periods rather than accurately reflecting current expenses. Consequently, such manipulations can create a distorted view of financial health and performance.