WeakWood Throne

In case you are wondering what is the butcher knife and where to find it, it is actually pretty simple.
On the second town, the butcher knife that Larry asks for is basically the ordinary knife, called "Knife", that you can buy from the weapons merchant on the same town.
Just tested this and got the achievement, as backup you can buy it also on the first town of the game or get ir for free on the same place you have the npc Forest zoz and it should be on the top left on the ground.

In the same scene where you get the Lillian quest from Forest Zoz there is a big greenish area on the left side. All the way on top of this area could you find this knife. It is not a quest item so do be careful not to sell it.

Larry you'll find 2 screens north, 1 screen east from here.

Some have reported that you'll find the knife SE on the first screen west of Larry, but I can't confirm that, but here is a playthrough on youtube where the knife is located where I found it.