Preheat oven to 350°F.
Cream butter and sugar. Beat in milk, vanilla and eggs. Combine flour, baking powder and salt; blend into butter mixture. Mix in coconut and cranberries.
Divide dough in half and shape into two 12-inch long logs on a lightly floured surface. Place on a buttered or parchment lined cookie sheet.
Bake 25-30 minutes or until golden brown.
Cool slightly and cut into ½-inch diagonal slices. Reduce oven temperature to 250°F. Place slices on a cookie sheet and bake for approximately 1 hour, until biscotti is dry.
For best results process coconut in food processor with blade attachment until coconut pieces are smaller ground-nut-sized particles. The resulting log will be easier to slice and have a more uniform texture.