Make dough: Beat butter and cream cheese until creamy; slowly add flour until blended. Chill dough for 30 minutes.
Preheat oven to 375. Put dough out on lightly floured surface and roll out to about 1/8 inch thickness. Using cookie cutter (2" round) press out cookies.
Spoon approximately 1/4 tsp preserves into middle of cut out. Fold over and seal edges with fingers then press with tines of fork. Place on lightly greased cookie sheet. Bake for 15 minutes. Cool on rack. Sprinkle with powdered sugar.