Hoffenheim eased past Borussia Moenchengladbach 2-0 with goals to Iceland's Gylfi Sigurdsson and striker Demba Ba.
Schalke, who have won their last three league games after a bad start and qualified top of their Champions League group for the round of 16, saw Christmas come early when coach Felix Magath restored their holidays to 10 days.
Magath had been angered by Schalke's bad start to the season and late last month he gave them less than a week off and ordered them to return to training on December 27.
However, after their win in Augsburg his players were told to return on Jan. 2 instead.
"I am very satisfied and that is why we all together will have a break until January 2," Magath told reporters. "I am satisfied with my team's performance. It was a tough task especially given the pitch condition."
Schalke found it hard going against well-positioned Augsburg on a rough pitch in freezing temperatures.
The Bavarians even threatened with Tobias Werner midway through the second half but he failed to beat keeper Manuel Neuer at point blank range.
Spaniard Raul took on the Augsburg defence single-handedly with six minutes left, shaking off three defenders and sending Peruvian Farfan through down the right to fire in the winner.
Hoffenheim had an easier task. Sigurdsson scored with a free-kick from 20 metres in the 35th minute, as keeper Christofer Heimeroth picked the wrong corner, to take the lead.
Ba made sure of their quarter-final spot in the 63nd minute as Gladbach were punished for the numerous defensive absences.
The loss was Gladbach's sixth consecutive defeat in all competitions and, with the team in bottom place in the league as well, coach Michael Frontzeck's future at the club is now in serious doubt going into the four-week winter break.
Title holders Bayern Munich are in action against VfB Stuttgart on Wednesday.
