This paper presents the application of integrated mathematical programming approach for the design of cellular manufacturing. The proposed approach is carried out in two phases The first phase concerning exceptional elements(EEs) in cell formation and the second phase facilities layout design. This paper considers the total costs of three important costs for (1) intercellular transfer (2) machine duplication and (3) subcontracting. One of Important issue is the calculation of the number of machines considering the maximum utilization of machines and the available capacity of a machines that can be transferred between cells. Facilities layout design is considered to reflect the real field data taking in to account the operational sequence of the parts to be manufactured. The model is formulated as mixed integer programming that is employed to find the optimal solution.