SpongeBob starts his day at work by making Sea Fries. Mr. Krabs calls him for a meeting in his office. Mr. Krabs tells SpongeBob about the Cheapest Krab Award and that he has been nominated, and is excited to hear that he is taking him to the Awards Ceremony.
SpongeBob and Mr. Krabs take the cheapest form of transportation possible - traveling through mail at the cost of a one cent stamp. They meet up with the other crabs at a hotel, only to find out that one of them, such as Chintzey McGee, did not spend a thing on their travel. Mr. Krabs teaches SpongeBob his first lesson about cheapness by giving the bellhop a tip (a quarter with a string attached to it) and then pulling it away from him. SpongeBob tries the same routine, only to fail. The two meet up again with the other crabs in time for the ceremony. A video of the nominees is shown, and Mr. Krabs gets worried about the competition. He asks SpongeBob to go up on the stage and "exaggerate" about him being cheap. SpongeBob gets confused and thinks he should lie, which he does by telling everyone that Mr. Krabs is generous, getting Mr. Krabs disqualified from winning the award.
Afterwards, Mr. Krabs cries about his loss, but SpongeBob tells him about "exaggerating" and Mr. Krabs becomes interested. The two begin "exaggerating" everything in their room (taking items and putting them in their suitcases). The other crabs soon realize that Mr. Krabs stole a whole room, and as a result, Mr. Krabs wins the award. However, the person who gave the award snags it back because of a string connected to it.
Coincidentally, both episodes have a theme of generosity and selfishness.
This is the second time Mr. Krabs brings SpongeBob to an Award Ceremony. The first was "Shell of a Man."
Both episodes also have a simiar title card.
The cheapskate handshake:
Two cheapskates say "penny pinching, penny pinching" while sticking their claws in the air and pinching
They pinch each other's butts
They say "cheap, cheap, cheap" like little birds and peck on the ground
When SpongeBob was "exaggerating" about Mr. Krabs being cheap, he was saying that he was very generous. If Mr. Krabs had just explained to the other crabs that SpongeBob was exaggerating/lying about him, then they might have understood that SpongeBob meant that Mr. Krabs was very cheap.
Of the three nominees, the only one which showed cheapness was Dwight tying toilet paper back onto the roll. Mr. Krabs charging customers $1 per step and Beuford ringing up a bag of potato chips three times (because they have "three times the flavor") could not really be considered displays of cheapness; technically, they were cheating customers out of money, not being cheap.
The crabs sneak toiletries and towels from the hotel, just like some people in real-life do.
Dwight T. Wad tied old toilet paper to the roll, but it was an ineffective method: someone could rip them off, flush them, and use clean pieces off the roll instead.