I've seen many techiques for making a cupcake hat, but by far the easiest (and quickest) i've found is the loom knit pattern at This Mama Knits. Instead of using Caron Simply Soft, I have been using the Michael's store brand yarn Loops & Threads Impeccable, in Espresso and Light Pink. For the cherry i just used some scrap bulky yarn I had laying around.
In order to do them on the round looms properly you need to have one that has an even number of pegs (because of the ribbing). The only looms I've seen with this is the Round Loom Set by Boye < that link takes you to a store where the set is $21.95, but I got mine at Walmart for $13!
This hat also sizes pretty small, the smallest loom is best for preemies, with the next size for infants, toddlers, and older kids/small headed adults. the biggest loom should fit an average size adult head.
Here is a picture of a completed hat: