PLACE 3/4 cup of the coconut in a resealable plastic bag. Set remaining 3/4 cup coconut aside. Add red food colouring to coconut in bag. Seal bag; shake until coconut is evenly tinted.
SPREAD tops of cupcakes with whipped topping. Sprinkle with red and white (uncoloured) coconuts as desired; press coconut gently into whipped topping to secure.
INSERT licorice piece into top of each cupcake for the "firecracker's fuse."