Concept:

Economic order quantity (EOQ), refers to the optimum amount of an item that should be ordered at any given point in time, such that the total annual cost of carrying and ordering that item is minimized. 

• The EOQ is a company's optimal order quantity that minimizes its total costs related to ordering, receiving, and holding inventory.
• The EOQ formula is best applied in situations where demand, ordering, and holding costs remain constant over time.
• One of the important limitations of the economic order quantity is that it assumes the demand for the company’s products is constant over time.

 The formula for the calculation of EOQ is:

\(EOQ=\sqrt \frac{2DS}{H}\)

D = Demand in units (typically on annual basis)

S = Order cost (per purchase order)

H =Holding cost

The goal of the EOQ formula is to identify the optimal number of product units to order. If achieved, a company can minimize its costs for buying, delivering, and storing units.

Conclusion:

Option1 is correct