The manual isn't clear about what all is supported, but 320kbps .mp3 files should be safe. It does clearly say non-compressed WMA (CD files) and apple lossless are not supported.
My .02 - a 256 or 320 bit rate mp3 file is sufficient. USB storage is cheap these days, so if you are going to go through the work of ripping them, may as well rip them at 320kbps. Most of mine are at 256kpbs and that used to be my personal sweet spot for size vs. quality but storage cost now is nothing compared to what it was several years ago. Dropping down to 128kbps is an obvious loss to most, as is sound quality sent over bluetooth.
mp3 files have metafile information in them in something called a file tag, which stores things like the artist, music type, and even album art. If you get those tags all correct, then the head unit does a great job of making all the music on your USB drive easy to navigate as you can then sort by artist, music type, etc.
Some software methods will populate those tags automatically when you rip your CD's. It's been a LONG time since I've ripped my files, but you'll be much happier with how the head unit works if your mp3 files have those tags correctly populated. So find software that does it at the same time. If you are not able to do that then the last music player I used for MP3's was musicbee, and it had good tools to edit those files.