Prepare the Cake Batter:

1. Preheat the Oven: Preheat your oven to 350°F (175°C). Grease and flour two 9-inch round cake pans.
2. Mix Dry Ingredients: In a medium bowl, whisk together the all-purpose flour, baking powder, baking soda, and salt. Set aside.
3. Cream Butter and Sugar: In a large mixing bowl, beat the softened butter and granulated sugar together until light and fluffy, about 3-4 minutes.
4. Add Eggs and Vanilla: Beat in the eggs one at a time, making sure each is fully incorporated. Add the vanilla extract and mix until combined.
5. Alternate Wet and Dry Ingredients: Gradually add the dry ingredients in three parts, alternating with the sour cream and milk, beginning and ending with the dry ingredients. Mix until just combined.
6. Add the Crunch: Gently fold in the crushed candy canes or peppermint bark to the batter.
7. Bake the Cake: Divide the batter evenly between the prepared cake pans and smooth the tops. Bake for 30-35 minutes, or until a toothpick inserted into the center comes out clean. Let the cakes cool in the pans for 10 minutes before transferring them to wire racks to cool completely.

Make the Frosting:

8. Cream Butter and Cream Cheese: In a large bowl, beat the softened butter and cream cheese together until smooth and creamy.
9. Add Powdered Sugar: Gradually add the powdered sugar, one cup at a time, beating well after each addition until the frosting is smooth.
10. Adjust Consistency: Add the vanilla extract and heavy cream, one tablespoon at a time, to reach your desired frosting consistency.

Assemble the Cake:

11. Layer the Cake: Once the cakes have cooled completely, place one layer on a serving plate. Spread a generous amount of frosting on top.
12. Add the Second Layer: Place the second cake layer on top of the frosting and press down gently.
13. Frost the Entire Cake: Frost the top and sides of the cake with the cream cheese frosting, making sure to cover it completely.

Decorate the Cake:

14. Add Crunch and Color: Sprinkle crushed candy canes or peppermint bark on top and around the sides of the cake for a festive crunch. Add red and green sprinkles, or any other festive colored candies, to decorate the top.
15. Chill the Cake: Refrigerate the cake for at least 30 minutes to set the frosting before serving.