Preheat the oven to 175 degrees C. Line baking trays with baking paper.
In a large bowl, cream together the butter, sugar and cream cheese until light and fluffy using an electric mixer. Add egg and vanilla; mix until well blended. Stir in flour by hand while adding enough red food coloring to make the dough turn a reddish hue. Roll dough into 2.5cm balls and place them on the prepared trays, spacing 2.5 cm apart. Refrigerate the biscuits on the trays until firm, about 10 minutes.
When the biscuits are firm, make three cuts across each to make 6 slices like a pie, cutting only about 2/3 of the way through the biscuit balls.
Bake in the preheated oven for 10 to 12 minutes, until cookies appear dry. Carefully, flatten them out a little if the “petals” need separating. Sprinkle with the red decorating sugar. Cool on the trays, then peel away from the paper.
Make the icing for the biscuits by mixing the icing sugar, water and yellow food colouring until they reach a piping consistency. Put icing into a pastry bag or resealable bag and cut a small piece off of the corner. Pipe yellow dots onto the center of the biscuits. Allow icing to dry before storing biscuits in an airtight container at room temperature.