Cream together the butter and shortening with an electric mixer until well blended, light and fluffy.
Add in vanilla and milk and continue to mix until incorporated.
Gradually add in powdered sugar mixing after each addition until you have added in 3 cups of powdered sugar. The frosting should be soft but hold its shape in stiff peaks, if necessary, add up to one more cup of sugar to get the desired texture.
In the bowl of a double boiler (or a heat safe bowl over a pot of water) melt the red candy melts over medium heat. If necessary to create a smooth texture add 1- 2 tbsp of shortening.
Set finished frosting aside.
Using a bread knife trim about 1 ½ inch off of the top (the open end) of each ice cream cone to make them shorter. It works best to score all the way around and then snap off the cone.
Place wax or parchment paper on your table or counter top.
Roll the cones in the melted candy melts to evenly coat the outside. Place them on prepared wax paper to cool.
Place sanding sugar or white sprinkles in a shallow dish.
While the cones are cooling place frosting in an icing bag fitted with a round tip or with the tip cut off. Pipe frosting onto the cupcakes. Gently dip the frosted cupcakes into the sanding sugar to coat frosting.
Next place a marshmallow on a toothpick or bamboo skewer. Coat the marshmallow with frosting and then dip it into the sanding sugar or sprinkles to coat and create the pom pom for the Santa hat.
Put a small dot of frosting on the tip of the ice cream cone and gently press the marshmallow into place. Repeat until all of the cones are finished.
Finally, gently press the cones into the frosting on the cupcakes.