The correct answer is: D. Neither 1 nor 2
Variable costs are costs that vary in direct proportion to the number of units produced. For example, the cost of raw materials is a variable cost, because the more units you produce, the more raw materials you will need. Fixed costs are costs that do not vary with the number of units produced. For example, the cost of rent is a fixed cost, because it does not matter how many units you produce, you will still have to pay rent.
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 decrease as the number of units produced increases. This is because the fixed costs are spread out over more units, so the cost per unit of each unit decreases. For fixed costs, the cost per unit will remain constant, regardless of the number of units produced. This is because the fixed costs are not affected by the number of units produced.
Therefore, neither statement 1 nor statement 2 is correct.