Festive Fruity Cookies

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1 pkg. (3 oz.) JELL-O Gelatin, any flavor, divided
1-3/4 cups flour
1/2 tsp. CALUMET Baking Powder
3/4 cup butter or margarine, softened
1/2 cup granulated sugar
1 egg
1 tsp. vanilla
2 cups powdered sugar
2 Tbsp. milk
3 Tbsp. sprinkles

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