This research presents the relationship among machining time, cycle time and demand rate in a cellular manufacturing system. The manufacturing cell produces part families by automated machines. This paper discusses the cases of increasing demand rate in an existing cell and designing cell based on the demand rate. This research developed an algorithm for decision making such as cycle time, machines and workers in order to minimize the total machine capacity and the number of workers for any given demand rate. The proposed algorithm was successfully applied for the design and operation of cell manufacturing with a good result.