EXERCISE 6-12. Problems Associated with Too Few Cost Pools Mott Manufacturing allocates factory overhead using one cost pool with direct labor hours as the allocation base. Mott has two production departments (PI & P2). The new accountant at Mott estimates that next year the total factory overhead costs will be $3,000,000 and approximately 400,000 direct labor hours will be worked. The accountant also estimates that PI will use 100,000 direct labor hours and there will be about $2,000,000 in overhead costs in PI. P2 will use 300,000 direct labor hours and there will be

$1,000,000 in overhead costs in P2. Mott has two products: Al and Bl. It takes two direct labor hours in PI and three direct labor hours in P2 to complete one unit of Al. It takes one direct labor hour in PI and four direct labor hours in P2 to complete one unit of Bl.

Required Which product will be undercosted and which will be overcosted with the one cost pool system? Support your answer with appropriate calculations.