In a large saucepan, combine sauce ingredients; bring to a boil, stirring constantly.
For the dumplings, combine flour, sugar and baking powder in a large bowl. Add milk, butter and vanilla; stir just until moistened. Gently fold in apples. Drop by heaping teaspoonfuls into the boiling sauce. Cover and cook over low heat until a knife inserted in the center comes out clean, about 8-10 minutes. Serve warm with whipped cream or ice cream if desired.