The correct answer is: C. time horizon
A variable cost is a cost that changes in proportion to the activity level. For example, the cost of raw materials is a variable cost because it increases as the number of units produced increases. A fixed cost is a cost that does not change in proportion to the activity level. For example, the cost of rent is a fixed cost because it remains the same regardless of the number of units produced.
The time horizon is the period of time over which a cost is considered to be fixed or variable. In the short run, some costs that are fixed in the long run may be variable. For example, the cost of a machine may be fixed in the long run, but it may be variable in the short run if the company has the option to rent the machine instead of buying it.
Units of labor, units of production, and units of inventory are all factors that can affect the level of costs, but they do not determine whether a cost is variable or fixed.