Preheat oven to 350°F (175°C) and line a baking sheet with parchment paper.

In a large bowl, beat the softened butter and cream cheese together until creamy and smooth.

Add the egg and vanilla extract to the mixture and beat until fully combined.

Gradually add the yellow cake mix and 1 cup of powdered sugar, mixing until combined into a thick dough.

Roll the dough into 1-inch balls and place them 2 inches apart on the prepared baking sheet.

Gently press each dough ball to slightly flatten it, then generously sprinkle red and green sprinkles on top.

Bake in the preheated oven for 12-15 minutes, or until the edges just start to turn golden.

Remove from oven and allow cookies to cool on the baking sheet for 5 minutes before transferring to a wire rack to cool completely.