Preheat oven to 350°F (175°C) and grease a 9x13 inch baking pan.
In a large bowl, whisk together flour, sugar, baking powder, and salt.
Add 0.5 cup softened butter, egg, milk, and 1.5 tsp vanilla extract to the dry ingredients and mix until smooth.
Fold in 0.33 cup rainbow sprinkles until evenly distributed.
Spread the batter evenly in the prepared pan and bake for 18-20 minutes or until a toothpick comes out clean.
Allow the cake to cool completely at room temperature.
Using a circular cookie cutter matching the diameter of your dessert cups, cut out 12 individual cake rounds.
Prepare the frosting by beating 0.5 cup softened butter with powdered sugar, heavy cream, and 0.5 tsp vanilla extract until light and fluffy.
Place one cake round into the base of each dessert cup.
Pipe a generous layer of buttercream frosting over the cake layer and garnish with additional rainbow sprinkles.