Preheat oven to 350F and line a muffin pan with cupcake liners.
Whisk together flour, baking powder, and salt in a bowl.
In a separate bowl, blend together egg, oil, sugar, vanilla extract, and milk.
Blend the wet mixture into the dry ingredients.
Divide the batter into the muffin pan and bake for 20-25 minutes.
Meanwhile, blend together the butter, milk, and powdered sugar.
Knead in food coloring of choice into the fondant. Flatten out with a non-stick rolling pin. Form into graduation hats as shown in the pictures.
Take muffins out of the oven and leave to cool.
Top with frosting and fondant hats.