Heat oven to 350°F. Place paper baking cup in each of 24 regular-size muffin cups or spray with cooking spray.
Make and bake cake as directed on box for cupcakes, using water, oil and egg whites. Cool 10 minutes; remove from pans to cooling racks. Cool completely, about 30 minutes.
In large bowl, mix powdered sugar and butter with spoon or electric mixer on low speed. Stir in vanilla and 3 tablespoons milk. Gradually beat in just enough remaining milk to make frosting smooth and spreadable. Frost cupcakes generously.
Create ornament designs using assorted candies. Use top of candy cane to create a “hook” on each cupcake.