The correct answer is: A. varies with the level of output.
Variable costs are costs that change in proportion to the level of output. For example, the cost of raw materials is a variable cost, because the more products you produce, the more raw materials you will need.
Fixed costs are costs that do not change in proportion to the level of output. For example, the cost of rent is a fixed cost, because the rent you pay will be the same regardless of how many products you produce.
The cost per unit is calculated by dividing the total cost by the number of units produced. For variable costs, the cost per unit will vary with the level of output. For example, if the total cost of raw materials is $100 and you produce 10 units, the cost per unit will be $10. If you produce 20 units, the cost per unit will be $5.
The cost per unit for fixed costs will remain constant regardless of the level of output. For example, if the rent is $100 per month, the cost per unit will be $100 regardless of whether you produce 10 units or 20 units.