Click the Grades tab in your course.

Use the dropdown menu which defaults to Grader report to select Gradebook setup.

Locate the category where you want to drop the lowest grade.

Click the three horizontal dots across from the category name and select Edit settings.

In the box next to Drop the lowest, type in the number of lowest scores you want automatically dropped and save your changes.

The word Dropped will appear to the left of the lowest score(s) in the student's grade view.