Heat oven to 375°F. In large bowl, break up cookie dough. Place candy canes in food-storage plastic bag. Seal bag; crush with rolling pin or meat mallet. Stir or knead crushed candy and flour into cookie dough until well blended.
Shape dough into 36 (1-inch) balls; roll in sugar. On ungreased cookie sheets, place balls 2 inches apart.
Bake 10 to 12 minutes or until light golden brown. Remove from oven; immediately top each cookie with 1 milk chocolate candy, pressing down firmly so cookie cracks around edge. Remove from cookie sheets to cooling rack.