(Not to make light of your predicament, but I have to vent a bit.)
Yeah, but for $1200 you probably get some guy who has been a plumber for 3 weeks to do the job for ya. He's watched all the videotapes, so he's qualified. Plus, he has a photo id/nametag, AND he wears nice booties over his tennis shoes. Yeah, he spends a long time on the phone while he's there (asking questions) but you percieve that as him being 'a man in demand'. When he got done you probably got a buttload of coupons for future use, a nice magnet for your fridge, a bunch of tags on the valves in your house along with a mint on your pillow. Heck, it wouldn't surprise me if they put a sign in your front yard.
Unless you had this heater replaced on a weekend, you should've also gotten a nice, soothing suppository and ointment for your bum.
But you were probably just blown away by "the water heater is a major appliance in your home" shpiel, or the "we can juggle some jobs around and get there right away", as well as the upfront pricing you were provided.
A simple 40 gal gas replacement should run 3 hours, slightly more if the call did not come in as a wh changeout. The very top, difficult changeout, would run 5 hours, but that is very rare. Where I work, if the heater isn't drained by the time we're done with the install, we'll send a couple of runners out later to get it.
BTW, was the installation inspected?
I know how upfront pricing for the most part screws the customer. I've made the mistake of taking some vehicles in for service. While it's very rare to pay more than what you're quoted, if you break it down, you're getting hosed sometimes. But, that's the price you pay for a quote. Espescially when you factor in that in many cases there is a commission involved. Some plumbers are paid a base wage (very low) plus a commission on sales. They only make money on $$$ sales, not on repairs.
Too many times when I've verbally ballparked a job for, let's say, $400 to $600, and the price comes out to $500, all the customer can remember is $400, so they're now pissed, even though they were billed t&m.
It's a total psychological game. I guess you look like the good guy if you play off someone's fear (of paying too much) by giving them an astronomical, up front number, to ease their mind of paying what it actually takes to do the job. That is unless you have a smart customer who is capable of simple division.
and see what the charge would be for that much time. 
