Combine butter and sugar in bowl. Beat at medium speed, scraping bowl often, until creamy. Add milk, egg and vanilla. Continue beating until well mixed. Add flour and baking powder; beat at low speed until well mixed. Cover; refrigerate 1 hour or until firm.
Heat oven to 375°F.
Roll out dough on lightly floured surface, one-half at a time (keeping remaining dough refrigerated), to 1/8-inch thickness. Cut with assorted 2-inch cookie cutters. Place 1 inch apart onto ungreased cookie sheets. Bake 5-7 minutes or until edges are lightly browned. Cool completely.
Frost and decorate cooled cookies as desired.
Roll dough to 1/8-inch thickness. Cut with 3-inch cookie cutters. Bake as directed above. 2 1/2 dozen.