(I teach first grade...)
At the end of Kindergarten, a good level would be about a DRA 3 or 4 (Or Guided Reading level C or D).
So by now, a level B would be fine.
What it means is that books are leveled based on difficulty. The difficulty is determined by a number of things, including text patterns, sight words, phonetics, etc.
An A, or Level 1 book may have the same text on each page except for one word, and the word would be in the picture. For example:
The balloon is red.
The balloon is blue.
The balloon is yellow.
The balloon is green.
Each page would ONLY have a picture of a balloon of that color on it.
A level B, or Level 2 book, looks very similar to an A book except that the last page may break the pattern. For example:
The car is blue.
The car is red.
The car is fast.
The car is slow.
I like my car.
Level C and D (3 and 4) bookshave slightly more sophisticated patterns, but the text is still very much supported by the pictures. Also, more variety in sight words will be introduced. Around level E (DRA 5), the text may appear in different spots on the page. In levels 1-4, the text is almost always in the same place, usually the bottom of the page or always on the left side of a 2-page spread. Simple dialogue (with ""), may appear in level C (3). Also, book length begins to increase. Most A and B books are only 6 or 8 pages long, sometimes even less. By C and D they may be 16 pages long, and some E books might be 24 pages or so.
As for the levels a student should go each year, it varies by grade. The biggest growth in terms of number of levels is usually seen in the first grade. The reading test does not just test decoding (sounding out words), but also comprehension. When you get into the higher levels, it takes longer to progress through them because the strategies and text features are more complex.