It was completely genuine, as the "you know... morons" part was adlibbed by Wilder. Little was already visibly struggling to hold a straight face as is, so when Wilder added that last part it made him crack. The film crew decided to keep that take in the movie because of how funny it was, but as the scene transitions you can see Wilder look towards the film crew as he wasn't sure if they would redo the scene because of it.