Get out enough small bowls for each color of chips you intend to make. Place 10 drops of the desired food coloring in each bowl.
Carefully melt white chocolate chips in the microwave by cooking them for 1 minute at 50% power, stir. Continue in 30 second intervals until smooth when stirred.
Once melted, spoon 1/4 - 1/2 cup melted chocolate in each bowl and stir until desired color.
Spread until parchment or wax paper lined baking sheet about 1/8 inch thick. Allow chocolate to set up. This goes faster in the fridge.
Chop the colors into chips with sharp knife. Store unused chips in the fridge.
Frosting
In a standing mixer fitted with a whisk, mix together sugar and butter. Mix on low speed until well blended and then increase speed to medium and beat for another 3 minutes.
Add vanilla and milk and continue to beat on medium speed for 1 minute more, adding more milk if needed for spreading consistency.