Melt 1 cup of candy melts in a medium sized bowl. You can use the microwave to melt them in 30s intervals or you can use a double boiler. Be careful not to overheat or allow moisture in the candy melts as they will seize.
Add 1 cup of chex cereal and gently mix until evenly coated.
Put 1/4 cup powdered sugar in a ziplock bag. Add candy coated chex and shake. Break up large pieces to get an even coat of sugar. Sprinkle a bit more sugar if needed.
Lay muddy buddies on baking sheet until dry. Do this with each color.