Preheat oven to 375°F. Lightly grease a cookie sheet and set aside.
To make cookie dough, cream butter, cream cheese, both sugars, almond extract and egg in a large bowl or stand mixer until fluffy.
In a medium bowl, combine flour, baking powder, and salt.Add dry ingredients to the creamed mixture and stir until a soft dough forms. Roll out dough on a lightly floured surface to about 1/2 inch thick (roll thinner for more crunchy sugar cookies).
Cut with cookie cutters and bake for 10-12 minutes on the prepared cookie sheet or until no longer glossy and bottoms are a light golden color. Let cookies sit on the cookie sheet for a few minutes, then remove to a rack to cool.
To make the frosting, in the bowl of a stand mixer fitted with the whisk attachment, cream butter until it becomes light and smooth. Add salt, food coloring, and 2 tablespoons of milk.
With the mixing speed on low, gradually add powdered sugar. Once the powdered sugar is incorporated, bring the mixing speed up to high and beat for 2 minutes. Add more milk to reach the desired consistency.
Frost onto cooled cookies with a spatula or a large star tip (to get the nest look). Add sprinkles, candies, and colored coconut.