I made these mugs for some friends 2 months ago.  We just got together (finally!) so I could give them out.  I posted the boxes back when I made the mugs, but needed to wait to post the contents lol.
I cut the outdoor vinyl monograms with my Lynx.  It cuts small files beautifully, cleanly, and quickly :0)
I used outdoor vinyl, and the 
free font 
RemesloSTD.