In a microwaveable safe bowl, melt half the white chocolate chips and half the butter together on high for 45 seconds; stir. Continue to microwave in 15 second intervals, if necessary, until the chocolate is melted and the mixture can be stirred smooth.
Stir in a few drops of red food dye until combined.
Pour the melted chocolate mixture evenly over cereal, folding gently with a spatula until evenly coated. Separate any pieces that are stuck together. (If the mixture doesn't drizzle, just dollop it in sections, but make sure to do it before it sets.)
Transfer to a gallon sized re-sealable food storage plastic bag. Add half the powdered sugar, seal bag and toss gently until all the cereal is well-coated.
Repeat the entire process with the other half of ingredients, using the blue food dye this time.
I prefer food gel over liquid dye because the colors are deeper and produce a truer color, but gel (as opposed to liquid dye) makes the mixture set up pretty fast, so it doesn't really drizzle. If using food gel, just gently spread it (with a spatula) over the cereal in sections. Everything will get coated once combined with the powdered sugar.