AN SMT FLC OVERSHOT THEIR ASSIGNED ALT WHILE TROUBLESHOOTING A MIKE PROB. THE ALT ALERT SOUNDED AND THE FLC WAS ABLE TO RESPOND WITHIN 300 FT OF THEIR ASSIGNED ALT. ALT OVERSHOT ALTDEV.

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CLBING OUT TO OUR ASSIGNED (FILED) ALT OF FL240 -- ZBW TOLD US TO CLB TO FL260 FOR TFC. I WAS THE PIC PNF IN THE R SEAT. ABOUT THIS TIME I WAS PREOCCUPIED WITH A MIKE PROB IN MY HEADSET. BECAUSE OF THIS I DISTRACTED THE PF. THE ALT SET WAS CHANGED FOR FL260; BUT UNNOTICED BY BOTH OF US; THE ALT SELECT MODE ON THE GLARE-SHIELD WAS NOT ARMED. THE PF MISSED IT AND I MISSED IT. AS WE CONTINUED TO FIGURE OUT MY MIKE PROB; BOTH OF US HEARD THE ALT ALERT TONE SOUND. THE PF ARRESTED THE CLB AND DSNDED TO FL260. THE UNEXPECTED CLB TO FL260; FLYING DIRECTLY INTO THE SUN (MAKING THE AUTOPLT MODE SELECTOR ALMOST INVISIBLE); AND THE AUTOPLT SYS ITSELF; WERE CONTRIBUTING FACTORS. IF AN ALT CHANGE IS MADE WHILE IN THE ALT CAPTURE MODE; THE MODE IS CANCELED AND WILL NOT CAPTURE THE NEW SELECTED ALT UNLESS THE CLB MODE OR ALT SELECT MODE IS PUSHED. WE WERE INVOLVED WITH A MINOR PROB AND OUR SITUATIONAL AWARENESS AND PRIORITIES WERE LACKING. A BETTER PROC FOR ALT AWARENESS IS IN THE WORKS SO THIS WON'T HAPPEN AGAIN.