What does "take the biscuit" mean — and why is it funny?

informal, British

Meaning

To be the most surprising, annoying, or extreme example of something — usually said in disbelief.

Where it comes from

A British phrase; Americans say 'take the cake'. The idea is of being awarded a prize, here for the most outrageous behaviour.

Why it is funny

The humor is the tiny, anticlimactic prize. The most jaw-dropping act imaginable is rewarded not with a trophy but with a single biscuit, which makes the outrage sound almost quaint.

Used in a sentence

"I've heard some excuses, but blaming the dog for the missing homework takes the biscuit."