You can drop a grade through the following steps:

 
1. From your Dashboard, select Go to Course
2. Select Grades from the menu on the left.
3. Select Setup from the top list of tabs.
4. Select Edit to the right of the course name.
5. Select Edit Settings
6. Select Show more beneath Grade category.
7. Within the Drop the lowest field, enter the amount of lowest grades you would like to drop. (For example, if you wish to drop the 2 lowest grades for each student, you will enter "2" within this field).
8. Select Save changes at the bottom of the page.