Heat oven to 350°F (180°C). Remove half of dough from wrapper; refrigerate remaining half until needed.
Cut dough into 1/4-inch (6 mm) slices, reshaping each into a round. For each cookie, cut narrow strips from opposite sides of slice.
On ungreased baking sheet, place larger piece. Shape dough strips into balls; roll in red sugar.
Place ball of dough on each cut side, 2/3 of the way down, on inside edge of cookie to form cheeks; press gently so balls almost touch.
Repeat with remaining slices, placing 2-inches (5 cm) apart on baking sheets. Repeat with remaining dough.
Bake 7 to 11 minutes or until light golden brown. Cool 1 minute; remove from baking sheets. Cool completely, about 10 minutes.
In small bowl, place 1/2 cup (125 mL) of the frosting. Stir in food colour until well blended. Frost top of each cookie with red frosting for hat.
Add marshmallow half; cut side down, for tassel on "hat."
Place remaining frosting in decorating bag fitted with writing tip, or in small resealable food-storage plastic bag with small hole cut in bottom corner of bag.
Pipe white frosting around remaining cookie edge for beard and across bottom of "hat." Attach candies with frosting for eyes, nose and mouth.