In a bowl stir together peanut butter and butter. Gradually add cereal if desired, and powdered sugar, stirring until combined. If necessary, knead with hands until smooth, shape mixture into 1-inch balls; place on a baking sheet lined with waxed paper. Set aside.

In a small heavy saucepan melt candy coating over low hear, stirring constantly until smooth. Remove from heat; cool for 5 minutes. Using fork, dip balls, one at a time, into coating, allowing excess to drip off. Return to waxed paper; let stand until coating is set (about 10 minutes). Store, tightly covered, in the refrigerator for up to 1 month or freeze for up to 3 months. If frozen, thaw at room temperature before serving.