Cream butter, cream cheese and sugar using the paddle attachment of a stand mixer. Beat until light and fluffy, 2 to 3 minutes or more. Add egg, and flavorings.
In a separate bowl, whisk together flour, baking powder, and salt. Add slowly to butter mixture. Mix until a soft dough forms. Divide in half.
Lay a sheet of parchment on a cookie sheet and place 1 ball of dough on it. Cover with plastic wrap and roll out to 1/4 to 1/8-inch thick. Repeat with second ball. Refrigerate 1 hour.
Heat oven to 350 degrees. Cut out cookies. Remove scraps (to reroll in the same method). Bake for 8 to 12 minutes, or until edges just start to brown. This will depend on how thick the cookies are. Check after 8.
Remove from oven. Allow to cool about 5 minutes before moving to a wire rack to cool completely before frosting.
To dip in chocolate, heat chocolate chips and butter in a microwave-safe bowl for 30 seconds. Stir. If not melted, return to microwave for another 30 seconds. Stir until melted.
Dip cookies in chocolate. Or, dip part in chocolate and use a silicone brush (like for basting meat) to spread chocolate where you want it. Return to the wire rack to harden. If using sprinkles, add before chocolate hardens.