Do men with smaller than average testicles produce less sperm and testosterone?

The size itself is not an indicator of the output. How small are the testicles and why are they small needs to be addressed, If you have any concerns, it would be prudent to consult a urologist.

There is some variation in the size of the testicles. Unless they are abnormally small (atrophied) they will prduce normal sperms and testosterone

The size of the testicles has nothing to do with the sperm count or the testosterone level of a healthy male. The lifestyle determines these levels. If you are a non excessive alcohol drinker, drug user, smoker, and have a healthy diet, than your levels should be normal. Exercise 4-5 times a week increases your testosterone levels.