Yes. Just go in the category and click on new to create a category into that category.
For the dropdown you're talking about, yes it's possible, we have an example on our demo website:
www.demo.hikashop.com/index.php?option=c...ow&Itemid=57&lang=en
You need to create a characteristic called size with the values you want. Then, add that characteristic to your product and click on the "manage variants" button to set your pricing for each variant of the product.
