Grade categories are useful for grouping assignments together, calculating subtotals, and doing special calculations such as dropping the lowest grades.
Category Settings
Category settings can be modified while creating a new category (To add a category, see Create & Organize Items & Categories in the Moodle Gradebook). To change the settings of an existing category:

On your main course page in the Administration block, click Grades. The gradebook will open to the Grader report.

In the navigation tabs (at top), click Categories and items. The Categories and Items page will open.

Locate the row that contains the title of the category. In the Actions column (at right), click Edit category (). The Edit category page will open.
Note: The Edit category button for the course total is found in the top row of the Categories and items table.

Click Show more... to adjust these settings. (See below for an explanation of some of these options.

When finished adjusting settings, scroll to the bottom of the page and click Save changes.
Aggregation
This setting determines the kind of calculation used to compute the category total.

Mean of grades: Average of all grade items in the category (the sum of all grades divided by the total number of grade items).

Custom weights: Each graded item is assigned a value used to determine the relative importance of the item in the overall calculation. The value does not need to be the same as the possible points for an item. If an item has a weight of "0," it will not be calculated in the total.

Sum of grades: The sum of all grade values in the category.
Aggregate only nonempty grades
This setting controls what the category does when grade items have empty scores for individual students.

Selected: Empty grades are skipped in the calculation and do not count against students.

Deselected (default): Empty grades are calculated as "0".
Drop the lowest
This setting enables a specified number of the lowest grades to be excluded from the category total.
Category total name
This name replaces the default "Category total" name that displays in the Grader report and the User report. This is useful when you use multiple categories so you can differentiate total columns.
Grade display type
This setting controls how the category total will display in the Grader report and the User report.

Letter: The numerical total converted to a letter value using the scale found on the Letters tab of the gradebook. To configure the letter scale used for this conversion, see Letter Grades in Moodle.

Percentage: The numerical total divided by the maximum possible points.

Real: The numerical total calculated by the category.
Overall decimal points
This setting determines the number of decimal points to display for each grade. This setting does not round values in calculations. If the category total is used in another calculation, the real numerical value will be used, which has an accuracy of 5 decimal places.