Preheat the oven to 350 degrees F and coat two 9-inch-round cake pans with cooking spray; line with parchment paper. Prepare the cake mix as directed; transfer the batter to the pans. Bake and cool as directed.
Combine half of the frosting with the crushed candy. Place 1 cake on a small cardboard circle, domed-side down; spread with the candy frosting. Place the other cake on top, domed-side up.
Round the bottom and top edges of the layer cake with a small serrated knife as shown. Cover the whole cake with a thin layer of the remaining plain frosting.
Microwave the marshmallows with 1/4 cup water in a large bowl until melted. Add the peppermint extract; gradually beat in all but 1/2 cup confectioners' sugar with a mixer until thick and stiff. Beat in the butter.
Remove half of the frosting mixture; knead in a little more confectioners' sugar until smooth. Roll out into a 13-inch circle on a piece of parchment dusted with confectioners' sugar.
Carefully invert the rolled-out frosting onto the cake; peel off the parchment, brushing off the excess sugar. Tuck around the bottom edge of the cake, pressing gently to adhere; trim the excess.
Beat enough gel food coloring into the remaining frosting mixture until bright red. Knead in the remaining confectioners' sugar until smooth.
Roll out the red frosting until 1/4 inch thick. Cut a 7-by-1 3/4-inch wavy stripe with a pointed tip out of paper (for a template, go to foodnetwork.com/caketemplate). Using the template, cut out 7 red stripes of frosting.
Carefully arrange the red stripes around the cake with the tips meeting at the center; press gently to adhere and tuck around the bottom of the cake, then trim any excess. Wrap the cake in cellophane.
Photograph by Andrew Purcell
Recipe courtesy of Food Network Magazine