The existence of intercellular moves due to bottleneck machines is a major road block to higher productivity gains in cellular manufacturing systems. One solution to this problem is the formation of a separate cell containing all bottleneck machines from different machine cells (hybrid cell). The formation of hybrid cell is based on the premise that the concentration of bottleneck machines in a single cell makes them more accessible to exceptional parts and simplifies the material flow. This paper presents a procedure for performance evaluation of hybrid cells with the purpose of verifying this premise. The procedure uses the sum of intercellular and intracellular material handling costs as a performance measure.