Preheat oven to 350°F and prepare a cupcake pan with liners.
Add the flour, sugar, baking powder and salt to a large mixer bowl and combine. Set aside.
Add the milk, vegetable oil, vanilla extract and eggs to a medium sized bowl and combine.
Add the wet ingredients to the dry ingredients and beat until well combined.
Slowly add the water to the batter and mix on low speed until well combined.
Scrape down the sides of the bowl as needed to make sure everything is well combined.
Fill the cupcake liners half way and bake for 15-17 minutes, or until a toothpick comes out clean. Remove the cupcakes from oven and allow to cool for 2 minutes, then remove to a cooling rack to finish cooling.
To make the frosting, combine the butter and shortening in a large mixer bowl and mix until smooth.
Add 2 cups of powdered sugar and mix until smooth.
Add the vanilla extract and 1 tablespoon of water or milk and mix until smooth.
Add remaining powdered sugar and mix until smooth
Add remaining water or milk as needed and mix until smooth.
Mix in cocoa powder.
Scoop into a piping bag and set aside.
To make the hats, line a baking sheet with wax paper.
Dip marshmallows into melted chocolate and set on top of a cookie. Allow to dry.
Using the white and yellow sparkle gels, make the hat belts.
Pipe the frosting onto the cupcakes. Set the hat on top. Using the black gel, make a happy face.