Xacto isnt the best way. It will work but it will not look very professional. Hot wire is what you will need. You can google it. You can even make them fairly easily with a few pieces you can get here and there. Most folks dont do layers, or at least I never have, Get the depth you need, cut out the piece and then cut the plug to the depth you want to keep.
Sme folks like using an electric carving knife and freezing the foam. I have never tried it that way, but I have seen some results and they looked very good.