Navigate to CATALOG > ATTRIBUTES > MANAGE ATTRIBUTES
Select Add New Attribute
Under Properties tab:
1. Enter a unique Attribute Code to identify the attribute within your system. This code should be all lower-cased with no spaces.
2. Set Scope to indicate where the attribute can be used, this should be set to Global.
3. Catalog Input Type for Store Owner should be set to Dropdown in order to create a configurable product.
4. Set Apply To, to All Product Types.
The rest of the options aren't necessary to change but can be based on preference.
If you are creating an attribute that will be used in a Configurable Product the scope must be set to Global and the Catalog Input Type for Store Owner must be set to Dropdown.
You may have noticed that after you selected Dropdown as the input type that a new field was added to the bottom of the Attribute Properties tab. This field is what allows the attribute you're creating to be used with configurable products. If this is set to "No", you will NOT be able to add this attribute to the base of your configurable product when it is created.
Make sure Use to Create Configurable Product is always set to "Yes".
Under Manage Label/ Options
1. Under Admin in the Manage Titles section, enter a descriptive label to identify the field during data entry. The next field is how the label will appear on the front-end of your store. You can leave the second field blank if you wish to use the Admin label as the default label.
2. Select Add option
3. Add as many options as desired in the boxes below admin
4. You can specify the position of the option in the list if desired
5. Save Attribute
You have now created a unique attribute that you can add to the default or your custom attribute set.
Navigate to CATALOG > ATTRIBUTES > MANAGE ATTRIBUTES SETS
1. Select desired attribute set
2. Under the Unassigned Attributes you will see the new attribute you just created
3. Drag it under the General section
4. Click Save Attribute Set