• Statement (I) is Correct: Traditional Mozzarella is a pasta filata (stretched-curd) cheese that is enzymatically coagulated by rennet (chymosin), which hydrolyzes the $\text{Phe}_{105}\text{-Met}_{106}$ peptide bond of $\kappa$-casein to induce micellar aggregation.
• Statement (II) is Correct: Direct acidification using food-grade organic acids (e.g., citric acid, lactic acid, or glucono-delta-lactone) is commonly practiced in commercial Mozzarella manufacturing to rapidly decrease curd pH to the critical stretching window ($\text{pH } 5.2\text{--}5.4$), eliminating the need for microbial starter culture fermentation.
• Conclusion: Both Statement (I) and Statement (II) are correct (Option 1).

• Function of Emulsifying Salts in Processed Cheese:
• Colloidal Role:
• Emulsifying salts (sodium citrates, disodium phosphate, polyphosphates at $2 - 3\%$) sequester calcium from the cross-linked calcium paracaseinate network of natural cheese during cooking ($70 - 85^\circ\text{C}$).
• This transforms insoluble paracaseinate into soluble sodium paracaseinate, which acts as a powerful amphiphilic emulsifier surrounding milk fat globules and preventing oil separation (free fat formation) upon heating.
• Conclusion: Prevent free fat formation (Option 1).

Correct option: (1) Prevent free fat formation

• Bancroft's Rule of Emulsion Formulation:
• Theoretical Axiom:
• 'The phase in which an emulsifier is preferentially soluble constitutes the continuous (external) phase of the emulsion.'
• Application:
• If a surfactant has low Hydrophile-Lipophile Balance (HLB $3 - 6$) and is soluble in the oil phase, it stabilizes Water-in-Oil (W/O) emulsions (e.g., butter, margarine).
• Hydrophilic surfactants (HLB $8 - 18$) soluble in water form Oil-in-Water (O/W) emulsions (e.g., milk, mayonnaise).
• Conclusion: Water-in-oil emulsions (Option 2).

Correct option: (2) Water-in-oil emulsions