Preheat oven to 350° and line a muffin tin with cupcake liners; set aside.
Add the shredded coconut to a skillet and heat over medium-low. Toast the coconut until it's slightly golden (be careful not to burn!) then transfer it to a plate. At this point, you should also melt the coconut oil either in the microwave or over the stove.
Whisk the coconut milk, applesauce, apple cider vinegar, and vanilla together, then add in the melted room temperature coconut oil.
In a separate bowl, stir together the all purpose flour, sugar, baking soda, baking powder, and salt. Pour the dry ingredients into the wet, then use a hand mixer to combine wet and dry ingredients, being careful not to over-mix the batter. Last, stir in the toasted coconut by hand.
Distribute the batter into the muffin tin (NOTE: the recipe makes 24 cupcakes, so you'll either need to use 2 muffin tins, or bake these in batches), then place them in the oven and bake the cupcakes for 20-25 minutes, or until a toothpick comes out clean. I recommend checking them at the 20 minute mark. Leave them in the tin for 10 minutes before carefully transferring them to a wire rack to cool.
While the cupcakes are cooling, make the frosting: whisk the softened coconut oil (or butter), milk and vanilla together, then add in the powdered sugar and stir until smooth.
Wait until the cupcakes have cooled to room temperature before icing them. Add the icing atop each cupcake, and then sprinkle with some extra coconut flakes (optional). Enjoy!