Steve Jones

I would get a sheet of ply wood or durarock and remove the old sub floor and install this. I would determine the thickness of these boards by the amount of floor you need to fill to get you up to the level of the floor leading into the bathroom.

I would screw this down to the joists and go every 8 inches for a squeak proof floor. Then I would use floor levelor to fill in any gaps.

Then I would get a good vinyl square tile to your choosing and lay it down. Do your caulking, and install new base boards and you should be set.

A room of this size should cost you in material around $100, labor might be around $350 to $400.