Yes, you can use that formula.
4e uses an "XP budget" system. The budget for a same-level fight is the XP for a standard monster of the party's level times the number of PCs in the party. The tables on pages 56 & 57 of the DMG have the relevant charts. Generally speaking, you can take the total XP value of an encounter, divide by 5 (number of players it was designed for) to get the XP per player, then multiply by 7 (number of players you have) to get the XP budget for that encounter. Then just add monsters to get it up to (approximately) that XP value.
It's mostly balanced.
Note that this scaling isn't quite perfect. In theory, a fight between 3 PCs and 3 standard monsters of the same level is balanced the same as a fight between 8 PCs and 8 standard monsters of the same level. In practice, alpha striking (winning initiative and using your best abilities before the enemy can act) and focus fire become more and more valuable as you increase the number of players & monsters.
Consider a fight in a hallway 3 squares wide. If 3 PCs fight 3 melee-range monsters, each monster should be able to get to a target. A good defender might be able to force the monsters to all attack him/her, but generally every monster should be able to attack somebody. Now consider a fight between 8 PCs and 8 melee-range monsters in that same hallway. Three of the PCs can simply block the hallway, leaving the remaining 5 players safe to use ranged/area attacks from behind them. Even worse, only 3 of the monsters will be able to attack; the other 5 will end up stuck behind their front line allies, unable to contribute.
Alternately, consider combat in a wide-open empty room or plains with no obstacles or other terrain of interest. In a 3v3 fight a PC can only be attacked by 3 monsters at a time, which means they can only take so much damage per turn, which means they'll generally have time to recognize when they're in trouble and get healing (via second wind or a leader). In a 8v8 fight, though, a single PC could theoretically be targeted by 8 monsters in a single turn (especially if they have ranged attacks), which could take them from "doing fine" to "unconscious" in a single round.