I used the cutout method I used the oval cutout set from Wilton. I had the larger oval and used the next smallest and cut out the rest leaving behind a C. You can check out my diaper bag in my photos. Oh and I used only fondant but I let it dry a little before cutting so they hold their shape then attach to cake.
I used panchanewjersey's method except I used circles, not ovals. I did these for purse cookies (there's a pic in my profile) but I will admit it was a huuuuuuuuuuuuugeeeeeeeeeeee pain in the butt!