A carpet tile (11) and tile cutting apparatus (20) that produces a carpet tile with a removable cutout section (13) defined by discontinuous slits (19) and held in place by bridges (14). The apparatus includes a perimeter cutting assembly (50) and retractable inner cutting assembly (40). The perimeter cutting assembly is used to cut the carpet tile and the inner cutting assembly simultaneously forms the discontinuous slits in the inner portion of the carpet tile. The inner cutting assembly can be engaged or disengaged during the carpet tile cutting process. The carpet tile is installed by severing the bridges and laying the border sections (12) on the floor with dissimilar cutouts within the borders to create a visually interesting floor covering.