To form the crater shape use a spackle (US) or polyfilla (UK), the latter being actually better as it is cellulose-based and does not shrink or warp while drying. Note that my projects that involve a lot of water-based spackling paste are usually constructed on a plywood base to prevent warping
Cover the whole thing with a PVA glue and sprinkle with fine sand:
When it is all dry, shake off excessive sand
Spray it all with a black paint
Drybrush it all with a grey paint
Glue some static grass to the base's rim
Blend the line between grass and sand with some black paint
These lairs of cuteness are usually decorated in a way suggesting they are aimed at XIX-century girls. Don't let this fool you! They often stock strange materials and oddly shaped objects that will solve your modelling problems »