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You have headed up your post as “ch 18 page 396” but I have absolutely no idea what you mean by this given that you have not said what book you are using!!!
I can only imagine it is referring to the use of absorption costing. The greater the production then the lower the amount of fixed costs absorbed, so the lower the cost per unit and the greater the profit per unit. However, if they are producing more than they are selling (and therefore increasing the inventory) then although it will mean more profit is reported in the current period the problem is that they might never end up selling the increased inventory (due to obsolescence etc)..
sorry sir forgot to mention the book , it was bpp, but ur explanation answers the question , thank you
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