New Relic: "Application Code (in /theme)"
New Relic offers Drupal monitoring as part of their paid Standard plan to collect metrics for Modules, Hooks, and Views.  


  The collection of Drupal-specific metrics can be
  controlled by the ini setting newrelic.framework.drupal.modules. It is
  enabled by default (in versions 3.0 and higher), and can be disabled
  with:
  
  newrelic.framework.drupal.modules = 0 Though this setting uses the
  word "modules", it controls the collection of all Drupal metrics:
  modules, views, and hooks.
  
  The PHP agent collects metrics for the following:
  
  Modules: Versions 2.5+. These metrics indicate time spent within each
  Drupal module. In versions 3.5+, time is calculated from the hook
  dispatch functions module_invoke and module_invoke_all. In previous
  versions, time was calculated from functions from a file with the
  ".module" extension where the file name and function prefix were a
  match. 
  Hooks: Versions 3.5+. These metrics indicate time spent within
  each Drupal hook. Time is calculated from the hook dispatch functions
  module_invoke and module_invoke_all. 
  Views: Versions 3.5+. These
  metrics indicate time spent within a view's view::execute method.


You are correct that New Relic: “Application Code (in /theme)” refers to the execution of the theme() function.  Given the throughput you referenced, this seems to be a minor issue, though there is definitely room for optimization if you're seeing ~7000ms response time.  I typically see around 400-500ms with similar throughput.